Constant Value + inflation twist
Posted: July 3rd, 2020, 5:26 pm
Constant Value or Constant Dollar is a simple approach that can throw off copious amounts of cash, such that your cash account has dividends, cash interest and cash-throw off accumulating in your cash account.
A twist is to instead revise the Constant Value to uplift that value by inflation. Having just run a backtest for that against the FTSE 250 index (with initial 50/50 stock weightings) I saw the share value appreciate with inflation (as naturally expected), along with a cash expansion rate that exceeded inflation (4.2% compared to 3.3% annualised inflation), and that was without dividends and cash interest being included. i.e. at a rate comparable to the stock side seeing the stock value pacing inflation, and initial cash value being 50% higher after a decade without including any dividends and cash interest.
The natural tendency is towards holding fewer shares over time, i.e. some shares tend to be sold when stocks have performed well. But at times can see number of shares increased - after stock prices have declined and some of cash is redeployed back into stocks. A form of add-low/reduce-high type trading.
Anyone actually using such a strategy/technique? Perhaps not that are reading here - they're probably out spending their cash instead
https://youtu.be/3m-wYP46TsU
A twist is to instead revise the Constant Value to uplift that value by inflation. Having just run a backtest for that against the FTSE 250 index (with initial 50/50 stock weightings) I saw the share value appreciate with inflation (as naturally expected), along with a cash expansion rate that exceeded inflation (4.2% compared to 3.3% annualised inflation), and that was without dividends and cash interest being included. i.e. at a rate comparable to the stock side seeing the stock value pacing inflation, and initial cash value being 50% higher after a decade without including any dividends and cash interest.
The natural tendency is towards holding fewer shares over time, i.e. some shares tend to be sold when stocks have performed well. But at times can see number of shares increased - after stock prices have declined and some of cash is redeployed back into stocks. A form of add-low/reduce-high type trading.
Anyone actually using such a strategy/technique? Perhaps not that are reading here - they're probably out spending their cash instead
https://youtu.be/3m-wYP46TsU