About a year ago in this thread I posted a picture of my analysis on the S&P 500 daily chart. I included the results of a simple 400 day SMA timing strategy (sell when price falls below SMA, buy when price rises above SMA). Of course, somebody asked if I included tax losses due to long- and short-term capital gains taxes. I didn't back then. But, yesterday I decided to fix my analysis.
I subtracted off the capital gains tax that would be due to the government from the balance of the SMA timing strategy on the first trading day of each calendar year that was included in the analysis. Obviously the taxes would depend on the individual's income tax bracket. I used 15% for long-term capital gains and 28% for short-term. The results over the past 66 1/2 years are that average annual returns (the mean of the total returns calculated each January 1st) are 8.41% and 10.82% for the buy-and-hold and timing strategies, respectively. The standard deviations of the returns are 16.36% and 12.20%, respectively. Calculated another way, the annual return over the entire 66 1/2 year period (calculated as (end value / initial value)1/66.49) was 7.47% and 10.52%, respectively. The analysis did not include transaction fees (which is insignificant for large initial investments).
From this analysis, I think it is fairly obvious that a simple timing strategy can provide greater returns over the buy-and-hold strategy. Although, perhaps everybody here already knows this...
Submitted February 04, 2018 at 12:41PM by Anon241469 http://ift.tt/2FHXjMM
