Welcome to the Perfect
Timing Investment Club Members’ Information Page
This
web site is an attempt to make it easier to distribute information to club
members. We will try to update the performance graph on a weekly basis
and slowly add information about the Club and our methods. Please feel
free to contribute ideas, and even better, write-ups.
Our
- to maximize returns subject to
positive returns over any 3 year period.
- limit company specific risks by
investing only in diversified exchange traded funds.
There
are times in the market some of which are seen in the graph above when the best
algorithms can just hang on and put you in a great position to profit going
forward.
Monthly
Performance (June 17 – December 30, 2011)
|
|
Annualized
Return |
Volatility |
Alpha |
Beta |
Sharpe
Ratio |
|
Perfect
Timing Investment Club |
-1.76% |
0.0591 |
1.14% |
0.72197 |
0.16% |
|
HSBC
Cnd Equity Fund |
-18.98% |
0.0428 |
-1.31% |
0.98430 |
-35.68% |
|
Market |
-11.26% |
0.0432 |
0.00% |
1.00000 |
-19.31% |
HSBC Cnd Equity Fund Investor Series is a popular mutual
fund (see http://www.hsbc.ca/1/2/en/personal/investing-retiring/investing-in-mutual-funds/mutual-funds
for more details).
Alpha is a measure of an investment's
performance on a risk-adjusted basis. A positive alpha means this fund
outperformed the S&P/TSX 60 Index by that percentage.
Beta is a measure of the volatility, or
systematic risk, of a security or a portfolio in comparison to the market as a
whole. A beta of 1.0 indicates that
the portfolio’s unit price will move in lock-step with the market (in our
case the S&P/TSX 60 Index).
Sharpe Ratio is a ratio that measures the
portfolio’s risk-adjusted performance by subtracting the risk-free rate
of return (assumed to be zero in our calculations) from the portfolio’s
rate of return and then dividing the result by the portfolio’s standard
deviation of its return.
The Club
Investment Philosophy
Our shared experience
Most of us
are here because we have heard the sales pitch from our financial planners -
and we want an alternative. There must be a better way.
The
market’s total return looks reasonably attractive - 6.2% for TSX 60
over the period from January 1, 2000 to December 31, 2010. However, if
you consider compounding, the annual return over that decade was only 4.94%/yr.
If you listened to your advisors you didn’t have all your money in
stocks - you had a mix equities, bonds and cash to reduce your investment
volatility and help you sleep at night. During the same period, on an
annualized basis the Canadian Bond Index returned 3.24%/yr. Depending on
what mix you picked, the return is between the two numbers. As an example
if you split your assets equally between equities and bonds then your combined
return would be about 4.1%. Or it would be if you didn’t have to pay
management fees, trading fees and advisor fees. Canadian Morningstar data
suggests that the typical MER for a balanced fund is 2.3% reducing your
effective return to 1.8%.
Yes,
it seems you would be better spending all your money when you consider
inflation.
“Oh
no” some advisors will tell you. “You cannot get ahead with
simple indexes - all you need to do is pick the right stocks.”
Yeah, right. Although it is probably easier to pick stocks than
pick a stock picker. Many advisors will promote the genius of their favourite
management to pick winners, but we all know how well that usually works. Most
hot stock pickers turn ice cold when markets change. If they are really that
good, then they will get rich and retire, perhaps to just invest their own
money.
The only thing constant is change
The
only thing consistent thing about the market is its volatility. Today’s
markets are seriously challenging the traditional long-term “buy and hold”
investment strategy. World stock markets seemingly swing wildly everyday. One
day, the TSX Composite index drops 300 points over the European financial
crisis. A few days later, the index rebounds on a better-than-expected job
report from the
We LIKE volatility
There
are novel mathematical algorithms that effectively convert some of this
volatility into return - the much-heralded alpha.
The
Club was formed by a bunch of like-minded people to explore and implement a
sophisticated probabilistic market-timing trading algorithm invented by Prof.
Kouritzin about 25 years ago and used on real portfolios since. The algorithm aims to achieve superior
capital appreciation while minimizing portfolio volatility and eliminating
company specific stock risk.
In a nutshell, it tries very hard to turn volatility into returns.
How? The algorithms detect statistical
pricing anomalies and then optimally rebalance a portfolio of blue chip equity
ETFs, fixed income ETFs and money market instruments to capitalize on these
anomalies. It may carry trades for an extended period of time (until anomalies
disappear) and occasionally utilizes leverage.
Club
Administration
Meetings
We
will meet once a quarter - typically in January, April, July and October to
review our progress, elect new members and transact normal business. Exact times, places and agendas will
typically be provided a week before the meeting. If any member would like to
bring a friend to a quarterly meeting who may be interested in joining, then
the friend or member should email us at perfecttiming@randomknowledge.net
well in advance. New members are always welcome.
Additional Contributions
Additional
contributions of at least $10,000 are welcome at any meeting, however please
provide 5 days notice and make sure that the funds are available to the club 2
days before the meeting.
As
always, when contributing funds please be reminded of sections XXIV and XXV of
the Membership agreement (see below if you do not have a personal copy handy).
XXIV. Risk Acknowledgment
By
endorsing their names on this Agreement each member specifically acknowledges
their understanding and acceptance of the fact that becoming a Member of this
Club is a risky venture. There is no guarantee that investments made through
the Club will increase over time or that a Member’s interest in this Club
will increase in value and, at the worse, the Member acknowledges that there is
potential for the Member’s investment to decrease in value.
Further,
the Member acknowledges that while hoping for an increase in the value of its
investment the investment itself is wholly at risk and that no guarantees have
been made or given by any other Member or individual in an effort to entice the
involvement of the Member in this Club. The Member freely and voluntarily enters
into membership herein without compulsion on the part of any other individual
and secure in the knowledge that this is a risky venture without guarantee as
to the results.
XXV. Chief Trader and Chief Auditor Release of Liability
Each
member acknowledges that a Chief Trader and Chief Auditor will be appointed for
the Club to facilitate the business of attending to the management of the
investments held by the Club. Further, each Member hereby acknowledges and
agrees that the Chief Trader and Chief Auditor shall be held harmless and free
of liability to the Members for any losses, costs, damages or expenses
whatsoever which the Club may sustain, pay or incur as a result of or in
connection with the performance, purported performance or other reasonable
actions of the Chief Trader and Chief Auditor carried out in good faith and in
furtherance of the goals of this Club. This release of liability in favour of
the Chief Trader and Chief Auditor is intended to be absolute with the only
exception being the perpetration of any act or acts of fraud or similar acts
intended to be detrimental to the Members of the Club but through which the
Chief Trader or Chief Auditor stand to enjoy a personal gain or benefit.
Perfect
Timing Investment Club Statistics and Documents
- Inception Date: June 20, 2011
- Current Number of Members: 11
- Club’s net assets
(January 2012): $1.7 million
- Costs: Trading fees ($7 per
trade), Interest cost when margins used (prime + 1.5%), and Operational
and Administration Costs (1% / annum) all are removed (on a lump basis)
prior to plotting our performance above.
- Bylaws
- Membership
Agreement