Managed Funds NavraInvest performance versus long term trend

I was just looking at some longterm trends of the Australian Stock Market(as you do over your morning coffee ) and over the last fifteen years you'd definitely have to say we were now in an 'above trend period'. (Tropo can probably give exact figures, I just stuck a ruler against a graph on the screen and thought the market should be about 4800 instead of about 5300 ).

While this may be justified by a strong economy and reasonable forward PER's etc, since March 2003 the Market has gone up 90-odd percent and if you were of the view that items generally return to the mean.......weellll.

This then got me thinking about the relative outperformance/underperformance of the NavraInvest Funds recently.

Yes the general philosophy is to Sell when going up and Buy when going down, but relative to what? Would you adopt exactly the same degree of trading in a rouring Bull Market as the depths of a Bear Market or indeed in a 'average' Market? Probably not.

Therefore, again hypothesising, I would think the further you got away from longterm trend lines the less 'dramatic' would be the size of your Buy/Sells and perhaps you would expect lower relative performance in these periods.

Were the Market to correct by 500 points tomorrow, it may well then be seen as prudent to have not been going for the big trading positions of late?

I take Gazza's point about the relative lack of Performance Fees of late and I don't view it as some type of isolated criticism. I would be surprised if it wasn't a disappointment to the Company as well.

Perhaps the above ponderings are a reason for the lack of relative outperformance though and what responses will be required will really be a time game to see what happens to the market in the short to medium term.

Enough waffling.....coffee is finished and I managed to forget for a few minutes I have to go to the dentist today.

 

March 2003 was of course the start of the Iraq War. Up to that point the market had declined significantly, dropping to 2900 or so from memory from a high of (again from memory) near 4000.

 

Yeah sadly the fund didn't get started until May 03. Whilst it's useless to speculate, I wonder if the first year's performance could have been better if the fund had been able to start before the start of the happy march upwards of the market

N.

 

Alan,

I like your magic ruler ...
If you consider weekly XJO chart (attached) you’ll find that XJO is still trending up between resistance/support lines with a impressive break above resistance line at "A" on the chart.
At the time when your estimated level was 4800, XJO hit 4758 level and went up (see chart).
Before this happened I have done my numbers and you can see 3 short lines on the weekly chart representing levels which could be hit at that time, if XJO broke down 3 years support line.
As you said – general philosophy is to sell when market is overbought and buy when market is oversold.
Problem is that you never know how long market will move up, down or sideways - even if it is strongly overbought / oversold.
If you know this in advance you’ll be the richest man on the planet.
Some traders ignore buy/sell signals generated by the system and go with the flow.

I agree with Sim saying " it is a very simplistic description of what I understand the trading system does ... there's a lot more to it than that I'm sure". Apart from complexity of the issue my guess is, that NI system contains independent sub-systems for each stock held in portfolio, generating buy/sell signals, calculating position size etc....
Short&medium term ... as long as XJO stays above 5210 level I see the bullish outlook (IMHO).

 

Not a problem Tropo.

By the way, the attached is the Australian Chart for the last 15 years for those interested.