Welcome to 2025, here are come thoughts regarding investing for Premium Service clients.
2025
Donald Trump will soon be inaugurated. Barring unexpected events he is likely to set the tone for the year. Whether we will be “good” or “bad” for investments, is anyone’s guess, and not the basis on which to form an investment strategy.
We have now had two years of strong stock market gains, with next to no negative shocks along the way. Simple probability tells me that 2025 could easily be very different – we are due a downturn.
It can be financially punishing to act in anticipation of a downturn (what if it doesn’t happen?), instead we must focus on being able weather it and to take advantage of it should it happen.
We can be sure downturns are temporary and that we are poised to take advantage.
PIP-VEVE
PIP-VEVE served us well in 2024. It did what I imagined it would – took profitable advantage of minor stock market back step.
Three cycles were completed – in May, August and October. We were in the market for 55 days in total (15% of the year) and generated total profits of 10% on the money invested.
While we waited for PIP-VEVE opportunities your cash earned interest – the overall return for the PIP-VEVE strategy was around12%.
This compares favourably with the bonds you would otherwise have held, which were down 4-5% in 2024.
16% more return was generated on your PIP-VEVE money (without increasing your overall risk) than would otherwise have been the case.
We very nearly bought again just before Christmas –on two consecutive days VEVE dropped below our target price, only to recover by the end of the day.
Which got me thinking…..
Intra-Day Dealing?
It can be frustrating watching and waiting for PIP-VEVE opportunities.
The strategy was conceived as a “safe” way to take advantage of minor back steps. Since 2023 I have softened the strategy. We no longer wait for a 5% drop, instead you all invest at 3% down and we usually go “all in” for most of you.
Still the need for “action” can be a persistent itch.
Buys/sells have always been placed before the market opens for a couple of reasons. First, I am always around at some point between 5pm and 8am the next morning and can be sure that the trades are placed. Second, if all your orders hit the market at the same time, I am sure as I can be that “best execution” / a fair price has been achieved.
In 2024 there were a handful of days when VEVE dropped below our target price but recovered. This got me thinking about acting “intra-day” – buying/selling while the market is open – rather than waiting for the close.
However, alluring as that might be, I can’t always be sure I (or someone else) will be available to place trades. Also, I can’t be sure you would all get the same price (how would I choose which money to place first?) and I am not keen on setting limit orders that automatically buy/sell if a certain price level is achieved.
It feels psychologically safer to deal with the frustration of just having missed out going in compared to any of the points above causing issues.
PIP-VEVE’s intention is a “safe” way to enhance returns on a pocket of money that would otherwise be inert.
Using a football analogy, intra-day feels like swapping a solid defensive midfielder for a virtuoso attacker when we don’t need to –yes great goals might be scored, but the risk of conceding increases in non-obvious ways.
So, for now, we will stick with how we do it. But I welcome your thoughts on this.
NASDAQ
You may recall that I dabbled with investing in the NASDAQ as an alternative to using VEVE – hoping for more action.
However, my single foray took 112 days to earn 4% –nowhere near good enough.
That is not to say that the idea is dead, but a whole different set of rules would be needed.
I will continue to experiment, but for now the juice is not worth the squeeze.
And that’s where my thoughts are as they pertain to your personalised investment strategy.