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Let's say that I have one of those systems that seems to good to be
true. Relax, I didn't get it from Joe.
It makes 100% per year with a 6% DD. As I said, too good to be true.
Of course, it makes some assumptions. I designed it to trade the ProFunds
Small Cap Funds (long and short). The tickers are SLPIX and SHPIX. I'm
assuming that I will get my buy/short signals just prior to the market
close and that I will enter on the close and that my slippage is going to
be zero. I might add that this is NOT my normal mode of trading.
Since these funds are supposed to "closely follow" the RUT and since data
for these funds doesn't go back very far, I used the RUT for my design and
backtesting. This is where I got the results that were so good that I
was ready to tell my wife that she won't have to be waiting tables and the
local pub.
For the final test, I decided to try it on the ProFunds tickers that I
mentioned above. Of course, data for these only goes back to
2002. Well.... since 2002 the system didn't do as well trading these
funds as it did trading the RUT. The difference was large, but the
results were acceptable. My wife could switch from full-time to part-time
work.
My question was/is "why the disparity between RUT and the corresponding
ProFunds?". I decided to go to the ProFunds site and see if they have a
comparison of performance between their funds and the RUT. There it was,
big as could be, the performance of their funds HAS NOT done as well as the
RUT over the last year or so.
So, the big question. Does anyone know why this is the case? I will,
of course, ask ProFunds to comment. But I thought that some of you mutual
fund traders (Fred?) might have a more realistic answer. How can they say
that these funds track an index when the performance is as much as 10%
different over some quarters?
Please hurry... I'm calling my wife in New Zealand later today and I want
to make sure I have my facts right before I tell her that she can retire.
Thanks!
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