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Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
As of 5/19/17, I stopped updating this test portfolio because getting quotes for the many funds I follow became too difficult.
This page shows a test portfolio based on trading Vanguard index mutual funds showing the worst performance. You can find background information
and what my tests revealed in Trading Mutual Funds.
Warning: I am not recommending that you use this portfolio to build a trading system or to trade the funds
listed in the portfolio. I just show this model as an experiment of how a system based mutual fund portfolio would do in real life.
You should conduct your own research to verify this trading idea and performance before relying on the results. Historical testing
may not reflect real-time trading and past performance does not guarantee future results. See Privacy/Disclaimer for more information.
Mutual Fund (Losers) Test Portfolio Overview
As mentioned previously, for full details on the historical experiments used to test this trading setup, see Trading Mutual Funds.
The idea for this portfolio came not from my head or from a book, but from test results. I discovered that trading the worst performing Vanguard index mutual funds resulted
in performance better than trading other mutual funds. This portfolio is a product of that testing.
Why this portfolio works is a mystery. Based on industry relative strength tests for stocks, I know that the worst performing stocks (not mutual funds) tend to
stay lousy performers (but not necessarily in last place. How long they remain "lousy" is unknown, so it is possible that poorly performing stocks show greater improvement over time than the best
performing ones for the same time period). Since the minimum hold time is 9 months for index funds, that gives the worst performing fund
the chance to improve enough before it is swapped out for another lousy fund.
Mutual Fund (Losers) Test Portfolio Construction Rules
I used the following guidelines to construct and maintain the portfolio.
- Use only Vanguard funds.
- Use only Index funds (any fund with the word Index in its name).
- No commissions or fees are charged (so any fund having a buy/sell fee is excluded).
- Fractional shares are allowed.
- Funds with a minimum hold time over 2 months are excluded (such as a 1 year minimum hold time).
- All trades occur at the net asset value (NAV) the next trading day after a signal.
- No duplicates allowed (each fund held is different).
- The portfolio begins with $100,000, split evenly between the two funds ($50,000 each).
- Proceeds from sales are used to buy the next fund without any redistribution of cash. That means if a sale has a value of $65,000, the full $65k is used to buy the next fund, not
split between the funds.
- Rank the index funds for performance over the prior month.
- Buy the two worst performing funds in the list.
- Hold each fund for a minimum (no maximum) of 9 months.
- After holding for 9 months, check monthly (the first trading day of each month) if the prior month's performance of a held fund is better than the worst
performing fund in the list of available funds. If so, then replace the best performer with the worst.
Mutual Fund (Losers) Test Portfolio Trading Tips
The historical performance of this portfolio is not as good as the one based on trading the best performing funds.
Index funds work better than non-index funds, and better than the combination of index and non-index funds from the Vanguard family.
The Mutual Fund (Losers) Test Portfolio
In the table, the Buy/Sell columns show the dates when shares were purchased/sold at the NAV. The Net Change column is the profit or loss of the trade, expressed
as a percentage (shares x sell price) - (shares x buy price). If the trade is still open, the closing price as of the
date the list was created is used as the sale price. The S&P Change column is the change in the S&P 500 index between the Buy
and Sell dates, using the opening prices. The Max Loss column shows the largest drop below the buy price during
the time the fund was held.
-- Thomas Bulkowski
| Stock | Buy | Shares | Price | Sell | Price | Net
Change | S&P
Change | Max
Loss |
| VGTSX | 02/04/2008 | 3,469 | $14.42 | 12/02/2008 | $7.74 | -46.3% |
-41.4% | -52.3% | | VEURX | 02/04/2008 | 1,962 | $25.48 | 12/02/2008 | $13.73 | -46.1% |
-41.4% | -52.4% | | NAESX | 12/02/2008 | 1,653 | $16.30 | 10/02/2009 | $23.09 | 41.6% |
25.9% | -21.0% | | VISVX | 12/02/2008 | 3,467 | $7.74 | 10/02/2009 | $10.56 | 36.4% |
25.9% | -26.1% | | VPACX | 10/02/2009 | 4,991 | $7.65 | 08/03/2010 | $8.12 | 6.2% |
9.3% | -4.2% | | VDAIX | 10/02/2009 | 2,451 | $14.94 | 09/02/2010 | $16.34 | 9.4% |
4.9% | 0.0% | | VFTSX | 08/03/2010 | 6,617 | $6.13 | 06/02/2011 | $7.24 | 18.1% |
16.8% | -7.1% | | VISVX | 09/02/2010 | 3,372 | $11.88 | 07/05/2011 | $15.20 | 28.0% |
24.0% | -0.4% | | VMVIX | 07/05/2011 | 2,523 | $20.32 | 05/02/2012 | $20.70 | 1.9% |
4.9% | -22.4% | | VEURX | 06/02/2011 | 2,060 | $23.25 | 07/03/2012 | $19.79 | -14.9% |
3.9% | -26.4% | | VPACX | 05/02/2012 | 6,044 | $8.64 | 03/04/2013 | $9.77 | 13.1% |
8.0% | -11.1% | | VDAIX | 07/03/2012 | 1,961 | $20.79 | 06/04/2013 | $25.13 | 20.8% |
20.1% | -2.0% | | VEURX | 03/04/2013 | 2,549 | $23.18 | 01/03/2014 | $27.90 | 20.4% |
20.7% | -1.9% | | VPACX | 06/04/2013 | 4,951 | $9.96 | 06/03/2014 | $10.90 | 9.5% |
17.2% | -5.1% | | VFWIX | 01/03/2014 | 3,956 | $17.97 | 12/02/2014 | $18.13 | 0.9% |
12.0% | -5.2% | | VISGX | 06/03/2014 | 1,643 | $32.85 | 06/02/2015 | $37.25 | 13.4% |
9.7% | -6.6% | | VPACX | 12/02/2014 | 6,762 | $10.61 | 10/02/2015 | $10.05 | -5.2% |
-6.4% | -9.1% | | VFWIX | 06/02/2015 | 3,231 | $18.94 | 05/03/2016 | $16.75 | -11.6% |
-1.6% | -22.6% | | VISGX | 10/02/2015 | 2,042 | $33.30 | 08/02/2016 | $36.07 | 8.3% |
12.9% | -15.8% | | VIGRX | 05/03/2016 | 1,004 | $53.88 | 04/04/2017 | $62.53 | 16.1% |
13.4% | -2.9% | | Stock | Buy | Shares | Price | Sell | Price | Net
Change | S&P
Change | Max
Loss | | VSIAX | 04/04/2017 | 1,200 | $52.32 | Open | $52.12 | -0.4% |
1.5% | -1.7% | | VHDYX | 08/02/2016 | 2,603 | $28.29 | Open | $30.29 | 7.1% |
9.0% | -2.9% |
Using completed trades only, a portfolio with a starting value of $100,000.00 would be worth $136,442.55, a change of 36.4%, with an maximum loss of 52.4%.
Including open trades, the starting value is $100,000.00 and the ending value is $141,406.31, a change of 41.4%, with an maximum loss of 52.4%.
For open trades during 2017, the change is -0.2%.
This report was prepared on May 18, 2017 and it covers the trades shown.
Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
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