The 12% Solution

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bei22000
Posts: 121
Joined: Mon Jan 30, 2017 2:58 pm

The 12% Solution

Post by bei22000 » Mon Mar 05, 2018 11:38 am

Has anyone read the book “The 12% Solution”by David Alan Carter ? Also there is a similar book called” the 3% Signal “written by Jason Kelly

Basically you use ETF version of either Vanguard or Fidelity Index Funds. One works with 6 ETF and other one does only 2 funds. But you have to move money between equity and fix income periodically. Both books have claimed that this would generate more income than the “ buy-and-hold “strategy that we have learned from here and other books. Any comments or practical experience about the strategy?
Thank you.

btenny
Posts: 5218
Joined: Sun Oct 07, 2007 6:47 pm

Re: The 12% Solution

Post by btenny » Mon Mar 05, 2018 12:35 pm

All these market timing books have been proven worthless when used in real time over some reasonable period of time. These books taught some method and show how it worked on "past performance" but fail to talk about how it fails to compete with standard buy and hold portfolios. Everyone at Bogleheads has read lots of books like you discuss. We do not believe they work. We are buy and hold people because we know we cannot time the market and know we have to stay invested to recover the market returns.

Good Luck.

Topic Author
bei22000
Posts: 121
Joined: Mon Jan 30, 2017 2:58 pm

Re: The 12% Solution

Post by bei22000 » Mon Mar 05, 2018 12:39 pm

Thank you for your feedback. I thought so too but was reading them yesterday-seems interesting but didn't know whether it would work in reality. I figure if it works then everyone can do it and kind of timing the market.

Dominic
Posts: 211
Joined: Sat Jul 02, 2016 11:36 am

Re: The 12% Solution

Post by Dominic » Mon Mar 05, 2018 12:52 pm

Eh.

I've read some papers on time series momentum or trend following strategies. Historically, they have returned better than buy-and-hold, and had less risk. However, I'm not convinced that this is a practical portfolio. There are serious tax implications of buying and selling asset, you have to pay bid/ask spreads on ETFs, usually commission-free funds have a holding period, it requires you to pay attention to your portfolio, etc. So if you use one of these strategies, you have to worry not only whether it will continue to pay off in the future, but whether it'll pay off enough to cover your costs. A buy-hold-rebalance strategy takes almost no time and costs almost nothing even after taxes and fees.

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midareff
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Location: Biscayne Bay, South Florida

Re: The 12% Solution

Post by midareff » Mon Mar 05, 2018 12:58 pm

I'll bet they generate a much higher tax bill to the IRS too. Moving money back and forth between fixed income and equities is an old strategy. Most folks do something similar, it's called rebalancing. FWIW, I rebalance my primary portfolio when it's called for by my IPS. I'm conservative, 70, retired 6 years and sleep great at night. OTOH, I have a smaller play portfolio @ FIDO which I mess with all the time and have run unrealistically high returns for years and years. All that has taught me is it is better to be lucky then smart. I can forecast from here to forever looking in the rear view mirror. ... which means as much as me trying to predict where my neighbors dog is going to yard poo tomorrow.

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