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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Mutual Fund (Losers) Test Portfolio

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/21/2017
23,591 160.50 0.7%
9,615 92.77 1.0%
758 2.01 0.3%
6,862 71.77 1.1%
2,599 16.89 0.7%
YTD
19.4%
6.3%
14.9%
27.5%
16.1%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

Written by and copyright © 2005-2017 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.

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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.

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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

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StockBuySharesPriceSellPriceNet
Change
S&P
Change
Max
Loss
VGTSX02/04/20083,469$14.4212/02/2008$7.74-46.3% -41.4%-52.3%
VEURX02/04/20081,962$25.4812/02/2008$13.73-46.1% -41.4%-52.4%
NAESX12/02/20081,653$16.3010/02/2009$23.0941.6% 25.9%-21.0%
VISVX12/02/20083,467$7.7410/02/2009$10.5636.4% 25.9%-26.1%
VPACX10/02/20094,991$7.6508/03/2010$8.126.2% 9.3%-4.2%
VDAIX10/02/20092,451$14.9409/02/2010$16.349.4% 4.9%0.0%
VFTSX08/03/20106,617$6.1306/02/2011$7.2418.1% 16.8%-7.1%
VISVX09/02/20103,372$11.8807/05/2011$15.2028.0% 24.0%-0.4%
VMVIX07/05/20112,523$20.3205/02/2012$20.701.9% 4.9%-22.4%
VEURX06/02/20112,060$23.2507/03/2012$19.79-14.9% 3.9%-26.4%
VPACX05/02/20126,044$8.6403/04/2013$9.7713.1% 8.0%-11.1%
VDAIX07/03/20121,961$20.7906/04/2013$25.1320.8% 20.1%-2.0%
VEURX03/04/20132,549$23.1801/03/2014$27.9020.4% 20.7%-1.9%
VPACX06/04/20134,951$9.9606/03/2014$10.909.5% 17.2%-5.1%
VFWIX01/03/20143,956$17.9712/02/2014$18.130.9% 12.0%-5.2%
VISGX06/03/20141,643$32.8506/02/2015$37.2513.4% 9.7%-6.6%
VPACX12/02/20146,762$10.6110/02/2015$10.05-5.2% -6.4%-9.1%
VFWIX06/02/20153,231$18.9405/03/2016$16.75-11.6% -1.6%-22.6%
VISGX10/02/20152,042$33.3008/02/2016$36.078.3% 12.9%-15.8%
VIGRX05/03/20161,004$53.8804/04/2017$62.5316.1% 13.4%-2.9%
StockBuySharesPriceSellPriceNet
Change
S&P
Change
Max
Loss
VSIAX04/04/20171,200$52.32Open$52.12-0.4% 1.5%-1.7%
VHDYX08/02/20162,603$28.29Open$30.297.1% 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.

See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Q: How many men does it take to change a roll of toilet paper? A: We don's know -- it's never happened.