Riding Waves: The Dichotomy of Short and Long-term Trends
📊Alfa Hedge Portfolio Update 23-10-16
Riding Waves: The Dichotomy of Short and Long-term Trends
Let's face it, in the ever-evolving world of investing, "riding the waves" isn't as straightforward as it sounds.
While some investors prefer to catch the rapid currents, others find solace in the slow, steady flow of the river.
The former are what we call the short-term trend followers. They're always on the lookout for those quick price spikes, keen to capitalize on a market's every whim. It's a bit like catching lightning in a bottle!
On the flip side, we have the long-term trend followers. They're the tortoises in this race, capturing the broader, prolonged shifts in market prices. They might not get the thrill of rapid gains, but they sure have a knack for diversifying against those pesky long-term equity declines. Slow and steady might just win the race after all!
The Need of Speed
Medium to slow trends, with those 12 to 20-week look-backs, seem to hit the sweet spot. These trends are no slouch, boasting a Sharpe ratio (pre-costs) of about 1. But here's the kicker: while long-term models may occasionally trip up during significant equity downturns, overall, they pack a mean punch with robust return benefits.
The Unsung Hero: Reduced Costs
Now, here's a dangling carrot for those fence-sitters: long-term models come with a side of reduced transaction cost slippage.
It's like getting a top-tier meal without the hefty bill. For traders and investors, this insight isn't just a silver lining; it's a golden opportunity.
In conclusion, whether you're a hare or a tortoise in the investment race, understanding these trends is your ticket to success. So, buckle up, chart your course, and may the best trend be with you!
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📊Riding Waves: The Dichotomy of Short and Long-term Trends