I can see from the questions that I am asked that not everyone understands how the Risk On-Off Model works and its purpose. Here are some definitive statements about it, which I have been trying to stress at every opportunity from the first day. Please always bear them in mind:
- It is not a trading model. You cannot use it for day-to-day market action in ANY asset class.
- It will not hunt for lows. It is a trend following model. It establishes the main trend and gets you into risk assets or out of them. That is all. It tells you if at any one time you should prefer Fixed Income investments or Equity investments.
- It is a long term model whose ONLY aim is to outperform a buy& hold strategy in Equities over YEARS. Not days. This it does REMARKABLY well.
- Its aim is therefore to have you invested in the SAFEST asset class at any one time, in the direction of the main trend it has established.
In order to help people who want to maximise their counter-trend returns and have time to do so (I envisaged this site for people who are not glued to screens and only have a few minutes a day to devote to their portfolios, at best), we will develop and publish next month an extra Tab, which will show you in which stage the market is and enable you to deploy accurate counter-trend strategies via options or purchases of individual shares/sectors. We like how Bespoke Invest has visually represented standard deviations from the mean (shown below) and we will try to emulate and improve upon this.
I will then narrate daily its findings in the Member Blog and try to help you with that too.
Please keep the questions coming if ever there is anything you are uncertain about. Either through the Comments to this Blog or through the contact email. Better to ask and be disabused than do something which costs you money!
Thank you Nick. This is a great website!
Very kind of you to say so. If anyone ever has suggestions on how to improve things, they are very welcome to post.
Thx Nicholas. This makes it more clear for me. As I said, I am a new member and didn’t mean to ask a dumb question as I’m sure your longer term members knew the points you stressed above.
Look forward to seeing and learning more and the upcoming new features.
No such thing as a dumb question! Keep them coming!
Just curious as I’m sure you have looked at it at some point, if the model says avoid risk, as in swap from equities to bonds, would there have been any benefit over bonds if the trigger was to short equities instead? What if the model was only allowed to go long or short equities based on signals. I assume it would hurt at inflection points from things being horrible to showing improvement but curious if the longer term move when short benefits at all.
Believe it or not, it ends up being quite similar over the long run, but the volatility is MUCH higher. Personally, I do use it to short equities too, but I am aware of the risks and am able to manage it. I designed this site for investors. If someone is a trading pro, they can use it that way too, with usual caveats applying.
Thanks again Nick!