So...who's been shopping?

I've found much the same works with funds too.

I certainly don't have much experience with trading, nor extensive experience with managed funds (2-3 years is not enough - especially with the boringly good markets we've had !!).

But my strategy for my funds is a bit of a mixture - I have two phases for each fund, accumulation and then consolidation.

For each fund I select (I currently have 6 I hold), I set a target value. Until I reach this value, I am in accumulation mode - and I put money into the fund that is currently performing the strongest (like you - I have found the best profits come from funds that are already doing well and showing strength). I measure "strength" as a numerical comparison measure based on a set of criteria for each fund. I know benchmark values for what score a fund should get when it is doing well, and I put my focus into the fund that gets the best score. The score is recalculated daily.

Once a fund reaches my target, it then moves into consolidation mode - where the strategy changes to taking profits as value goes up, and buying more as value goes down. Based on my preferred minimum transaction size and the size of the target value, I currently work on a 5% consolidation range. That is - when the price goes 5% above my target value, I'll sell enough to bring it back to the target. This is usually then reinvested into a fund still in accumulation mode - or once all funds reach their target - will be used to lower LVR and also build up cash buffers.

When the price drops 5% below my target, I'll buy more. At least that's the theory ... I've discovered in the last few days that my best laid plans went out the window as my LVR shot through my personal maximum (I was pushing the limits by gearing up - with low cash reserves) - leaving me with no capacity to buy more even if I wanted to. However, none of my funds are near the 5% below the target (most were 2-3% above target before the correction) ... so I haven't been in a position to buy yet anyway. I've got plenty of margin buffer available, so I'm not concerned about margin calls ... yet! I have cash elsewhere that can be used if really necessary - but will probably sell down some of the badly performing funds to cover margin calls rather than eat into my personal (non-investment) cash reserves. If it gets that bad, I would most likely have sold out of something by then anyway.

I also watch the longer term moving averages ... if a fund crosses through the 100 day moving average I start to watch it very carefully, and if it crosses the 200 day moving average for more than 5 days, I'll sell out of the fund completely - it gets put in the "too volatile" basket. The CFS Global Resources fund was put in this basket back in January - and although it has done well since then, it has still been far too volatile for my liking (blame the seemingly random movements in commodity prices for that). I'm glad I don't hold it at the moment. It is still on my watch list though - and I may add it to my holdings in the future if I decide to expand beyond 6 funds.

If a fund is down sharply, but nowhere near the 100 or 200 day moving averages, I'll just sit on it ... most high growth funds I've been watching show a degree of volatility at times, but rarely break through the 100 day moving average and even more rarely through the 200 day moving average. If they do cross the 200 day moving average, it's usually a sign of a longer term down period, which can take up to 12 months to recover from (sometimes longer).

So, right now, I'm just sitting and watching. I don't have the cash available to buy right now, and none of my funds are even close to the point where I would consider selling down or selling out.

My funds are mostly still in profit situation (even the ones I bought into during Jan/Feb this year), and the only one currently in a loss situation is the most recent aquisition - CFS W/S Colliers International Property Securities - which I bought into in only the last week or so. Bad move in retrospect ... but there's no easy way to monitor the international listed property market sentiment that I'm aware of yet ... something I need to look into I guess. I'm surprised it has performed so badly with the correction ... but then I don't have a good understanding of how the fund behaves yet - that only comes once I've held a fund for a while.

 

I first did it using a huge spreadsheet, but it was huge for just one fund, let alone 6+ !!!

So I wrote a computer program to do it - I have a database with all the historic unit prices, and I calculate a running value based on having invested $x at inception (the actual amount doesn't matter - you deal with percentages). The tricky thing is you need to calculate it having reinvested distributions - that's the only accurate way to chart more than a quarter at a time.

Then for each day, I just calculate the average value of the past 20/50/100/200 trading days (you can do the same for any value - depends on how much detail you want). Excel can actually do this for you easily on a chart (see trendlines) ... but it's a bit ugly to look at. The main problem with Excel is that it isn't as easy to get a variety of views of the data without creating multiple charts, which can get a bit cumersome (especially with multiple funds to track) ... but you can do it.

When I get a chance - and some reliable clean data, I'll look at putting my charting online (it's all web based). May just have to pay for the data - will need to research how much it costs.