The Simple strategy…

The Simple strategy…

The above strategy uses just 2 funds. The HDFC Nifty index fund and the HDFC Gilt Long term fund – both are growth options i.e. dividends are reinvested.

Rules:

• ·         Buy index fund if monthly close above 10 month moving average (MA)
• ·     Sell index fund if monthly close below 10 month MA and invest proceeds in gilt fund if gilt fund above its 10 month MA for the month.
• ·         In cash if both below 10 month MA

The strategy has performed well over the last 10+ years outperforming a buy-hold and hope approach. Though we don’t have a lot of data history, but it’s a good strategy to have in ones arsenal. The system has lesser volatility and drawdowns compared to a simple buy and hold mainly due to the trend following element of using a 10 month MA. The main point that I love – only 12 decisions a year – only have to look at this once a month. J

For further reading, there is a tonne of research and data available at mebfaber.com regarding the use of a 10 month moving average in building portfolios.

Keep it simple, thanks for reading J