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Super: Outstanding results on the Bernstein method. Mind
elaborating on "my implementation of them?"
--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist
<no_reply@xxxx> wrote:
> Andy,
>
> Here are the results from Bernstein's buy and hold asset allocation
> methods based on my implementation of them.
>
> 1998 -7.86
> 1999 27.73
> 2000 3.30
> 2001 2.83
> 2002 1.76
> 2003 49.95
> 2004 23.76
> YTD 4.35
>
> The statement I made was if I had used Bernstein's approach, I
would
> have been nearly as well off money wise as I have been trading.
>
> Your question implies do I do better than the numbers above from
> trading. Yes, considerably better. However, when you consider that
the
> numbers I've given you are nearly all capital gains, the issue
becomes
> taxes and expenses.
>
> If you consider Federal and State Tax on my trading profits, I pay
> nearly 50% of my earnings to the government. Then there is the
issue
> of expenses--data, professional fees for accountants and attorneys,
> educational materials, equipment and software.
>
> There is no social security tax, nor can I deduct expenses because
I
> don't file as a trading business. I can't contribute to a defined
> benefits plan or SEP or 401K. I could set up a Sub S and trade from
> that but it triggers automatic detailed audits when it's a trading
> company, which I don't much like based on the others I have had to
put
> up with.
>
> When I draw money out of a buy and hold account, I don't pay tax on
> the full amount. I only pay tax on the difference between my cost
> basis and the gain. On the gain I only pay 15%. So I don't need to
> draw out as much to have the same after tax income. When you
figure it
> all out, my taxes would be very small on draws from the buy and
hold
> accounts.
>
> None of this includes time, hours and hours of time. What's that
> worth? Over the last five years, I've put more hours into my
trading
> than I did when I was working full time. My previous job was very
> demanding, trading demands more.
>
> When I take all of the factors into consideration, for me, I can't
> give trading an overwhelming endorsement even though I actually
make
> money from it.
>
> Before I started trading full time, I worked the problem
backwards. In
> other words I estimated what I would make from buy and hold and
then
> what I would have to make from trading to beat that including the
> taxes, expenses, etc. I missed the time estimate.
>
> So far my financial models have been within the expected
tolerances,
> but each year when I evaluate the comparable worth including the
> intangibles, it's a hard question to answer in hindsight between
which
> method would have been better.
>
> One of the issues for someone who has to make a living from a buy
and
> hold asset allocation model is the performance of the model during
the
> first three years. The first three years generally determine how
> successful the method will be over the long run.
>
> For example, if I had started the Bernstein method with a
combination
> of a couple of losing years and then a strong year and then a
couple
> of profitable but low return years, the Bernstein method would not
> compare as favorably to trading as it does. Not only is there
drawdown
> from losing money, there is additional drawdown from living
expenses.
> That extra drawdown makes it harder to recover in the good years.
You
> can easily see this with Monte Carlo simulation, which I have run
on a
> number of asset allocation models.
>
> For anyone who is not trying to make a living off of a portfolio,
then
> the starting point is not nearly so important. In that case, I
almost
> always recommend the asset allocation model instead of trading.
>
> For those who want to have some fun trading or swinging for home
runs
> or whatever, I suggest they put 90% of their assets into the model
and
> only trade with 10%.
>
> As I mentioned in the other articles, there have been other
benefits
> to trading outside of the money. However, in reviewing the last
five
> years, it's a tough choice--at least for me.
>
> Everybody has their reasons for whatever they do. I don't mind
sharing
> my reasoning if it helps someone else make an informed decision.
>
>
>
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
> <andysmith_999@xxxx> wrote:
> > Super. If I recall correctly, you said in a prior post that had
you
> > used Bernstein's approach, your trading results over the last
few
> > years would be no worse than they are now? Surely that can't be
right.
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