The 12% Solution by David Alan Carter

Author:David Alan Carter [Carter, David Alan]
Language: eng
Format: epub
Published: 2017-09-01T05:00:00+00:00

When we chart our 4 equity ETFs for relative performance, we’re starting 3 months prior and watching the trendline for each fund as it progresses to the end date. Just as every race begins at the starting line, all 4 ETFs begin at the 0.0% line. The one thing constant throughout the 3-month “race” is that 0.0% line. Should all 4 ETFs end the race below that 0.0% line, it indicates that each fund lost value compared to holding an asset that generated zero returns.

What generates zero returns? Cash. And our relative performance test predicts that the trends on the chart will continue ‒ at least for the better part of the upcoming month. So we go to cash.

How does this cash trigger impact our overall returns? Let’s go back to 2016. Here’s how the monthly rotation shakes out, both with and without the cash trigger. We buy…

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