I’ve been trading this system (Version 1) live in a Fidelity 401K account. It is definitely the easiest system I’ve ever traded. It should be though as it is designed to be a long-term system for a retirement account or for someone that wants moderate out-performance with a reduction in the potential for a huge drawdown. There are never issues with fills and because money can be rolled from one fund into another, there are no issues with settlement.
I’m also still tracking Version 2, which is still having problems. It is a good example of why after backtesting one should track a system in real-time before committing real money to it.
Read more about Version 1 and its development here.
Read more about Version 2 and its development here.
Version 1 YTD
- Net Profit 9.03% (12.95% annualized)
- Exposure 83.97%
- Net Risk Adjusted Return 10.75%
- Trades 15
- Winning Trades 53.33%
- Average Profit Per Trade 1.85%
- Max System % Drawdown -9.96%
- Profit Factor 2.35
- Sharpe Ratio 0.85
Version 2 YTD
- Net Profit -1.68%
I don’t see any need to record the rest of the metrics for Version 2.
- Net Profit 14.91% (Annualized 21.64%)
- Max % Drawdown -9.64%
5 Responses to Fidelity Sector Rotational System Year-to-Date Performance
That’s really excellent performance, Wood, I’m impressed. In trying to develop my own system I spent a month reading the published papers on momentum, and decided it would be difficult until the market stabilizes. The past 15 years have been a very unusual investing climate and have not been kind for momentum strategies. They herded you into tech, which then crashed; then in 2008 they herded you into.anti-financials, which lasted into 2009 until they crashed, replaced by financials zooming up. These crashes really destroy momentum systems’ performance. I suspect your filters are critical to overcoming this. If you see the same two or three funds coming up month after month we’re in for another one.
Bozo, the thing to remember about momentum is that it has worked for a long, long time. Decades. Generations. Yes, the optimum lookback period shifts, but in the end, if your ranking method is robust, it should be able to get on a trend while it is relatively early but not too early and also not too late, if that makes sense. Beyond that, rotating among non-correlated really helps mitigate some of what you describe above, like getting herded into tech, financials, etc.
Also, while it was up almost another 1% today, it is underperforming. I’m expecting it to catch up slowly, likely during the next major correction.
Actually many systems Fidelity Select Funds have performed quite well this year.
this one is the best:
This one is quite good.
However both of the above did not do well in 2008 as they do not have any holding filter.
This one has returned about 20% this year, and due to its use of TLT/VUSTX as the holding filter, (in backtesting) it did not have a large drawdown,
Hi. On Part 4 of the initial postings for sector rotation, there was reference to the adaptation of a weekly approach. I think Varan posted these comments. Do you know how I can understand more about this strategy and or if any excel files are available with the historical performance of utilising a weekly approach? It was mentioned returns are better than the initial sector rotation strategy but I do not know to what degree. Would be interesting to find out. Can you kindly assist?