Monthly Update RVM Strategy and RVM Retirement August 2021

Now that 2021 has entered the month of August, let's take another look at how things have been going.

RVM Strategy: Achieved a return of +1.70% in July (19th consecutive positive month).
RVM Retirement: Achieved a return of +4.68% in July.

The difference in returns is explained by some long-term holdings present at RVM Retirement, and not at RVM Strategy. Those long-term holdings performed well in July. The momentum strategy is more or less the same in RVM Retirement and RVM Strategy. We work with the same algorithm for the momentum strategy in both systems.

RVM Strategy: stable returns under all market conditions

For whom is RVM Strategy suitable?

For an investor seeking stable returns in both rising and falling markets.

Will the coming years look like the past years?

The honest answer is that this cannot be said. So there are no guarantees.
But our expectation is positive. We think that the future will not be much different from the past, as far as this system is concerned.

For those who find it interesting to read a little more.

Below, we will discuss a strategy that was very successful from the bottom of the Corona crisis: buying on decline. How does a stock market analyst look at this?

July was a very difficult trading month

Despite the higher July and the positive results in our two systems, it was a far from easy trading month. We mainly follow the AEX index, where the results were very wild. What we have been seeing for some time now, big swings, big amplitudes, benefits a certain kind of trade; the trade of people who take very short-term risks and like to think contrairically. But the constant is above all, for some time now: those who buy every drop on the AEX, will see these positions bought on drops flourish at some point. Buying on decline has been the best strategy for the major indices in 2020, and in 2021 too. Actually, as is logical, buying on decline in a positive market is always a defensible strategy.

Buying on decline

So, could that be a successful system, buying on the decline? If so, why didn't we at RVM develop a system that can buy on decline, on temporary weakness in a bull market?
The reason is a statistical one. Suppose we could establish that in 9 out of 10 cases, over 30 years of market history, it is lucrative to buy a decline in a leading index. Is that good enough for a trading system?

The answer is no, it is not good enough. Those who buy on the decline incur a constant cost, for the additional buy. These costs must be deducted from the possible return. That is the first thing to do.
Then, it must be determined when a buy-on-decline must be sold again. Here too, rules must be drawn up, and these should preferably not be arbitrary, determined with a wet finger. Even the setting of a stop should not be determined arbitrarily. And it soon becomes apparent that this cannot be systematised with a good 'set of rules'.

The main problem with such a methodology is: there are market conditions in which a drop should not be bought. Nobody can tell us on what day a bull market tops, and turns into a bear market. Buying on a fall can therefore go wrong immediately after the purchase has been made. It is never possible to tell when it will be February 2020, to put it briefly, and the market will be facing a decline that is without precedent.

That is why we have not been able to devise a methodology that takes purchase on decline as its starting point. It does not matter that such a methodology would have worked well as of March 2020. Someone who builds a system is primarily interested in when the system does NOT work, and whether the damage can then be limited sufficiently. If that cannot be systematised, the methodology is not interesting enough.
We now have 28 years of experience in the market, we have done a lot of testing, and it has been the same as in other fields: the more you know, the more skilled you become, the better you know what is NOT good.

Above all, you realise that the saying 'many roads lead to Rome' does not apply to investing. On the contrary, few roads lead to Rome; most roads are dead ends.

Hence our methodology

Hence, for RVM Strategy and RVM Retirement, we are sticking to a proven methodology. Until we've been able to develop something even better, we're sticking with what we started with in 2019. It is the best we have to offer at Van Megen Trading.