Monthly Momentum - ASX300 Super

[Cam019]

@peter2 always glad when you chime in. ?

Let me address some of the commentary above and explain why I do things the way I am doing them.

One of the reasons I stuck with the ASX100 was liquidity. Even though I only have a relatively small SMSF balance at the moment, I wanted a stock selection universe that my fund could grow into, if you will. I didn’t want to have to worry about larger bid ask spreads on days when I needed to buy or sell. Additionally, as my fund grows I will be allocating funds to other asset classes so the SMSF getting too large for the system and chosen universe is basically impossible. Plus, I will build in that diversification.

Other things like my backtest results showed much larger maxDD’s using this system on a broader universe such as the ASX300. Easily in the realm of -60%+ maxDD’s. More than I was willing to tolerate.

One thing I personally do when I am entering and exiting positions is that I never leave the orders pending. I log on at lunch time usually when I’m at work and I execute my orders instantly. For example, I log in to my broker, look at how many shares I need to sell for a particular stock, then I check the bid depth and let’s say I want to sell 1000 shares and the bid depth is 1500 shares at $2.45, then I immediately place my limit order to sell 1000 shares with a limit of $2.45 and I am instantly filled and I don’t have to worry about getting slipped. Obviously it’s the reverse for buys.

As for the Sovereign Risk factor, yes I am aware of it and it is very hard to manage but I believe trading a narrower, larger cap, liquid universe should eliminate some, but never all of this risk. Again, back to my many reasons for staying with the ASX100.

Interestingly enough, I also think trading a system with only 4 open positions at any one time reduces my chances of getting into a company that is exposed to sovereign risk, as opposed to spreading your portfolio over a larger number of stocks like 10 to 20. The trade off here is obviously volatility, which I don’t see as risk, so, I’m happy to weather it.

 

[Roller_1]

One thing I personally do when I am entering and exiting positions is that I never leave the orders pending. I log on at lunch time usually when I’m at work and I execute my orders instantly. For example, I log in to my broker, look at how many shares I need to sell for a particular stock, then I check the bid depth and let’s say I want to sell 1000 shares and the bid depth is 1500 shares at $2.45, then I immediately place my limit order to sell 1000 shares with a limit of $2.45 and I am instantly filled and I don’t have to worry about getting slipped. Obviously it’s the reverse for buys.

What is the reason for not participating in the opening option @Cam019 and executing the trades the way you are? Or are you just talking if you do not get filled at the open for whatever reason?

 

[peter2]

@Cam019 My apologies for overlooking that your system uses the top100. Good thinking and good planning.

 

[Cam019]

What is the reason for not participating in the opening option @Cam019 and executing the trades the way you are? Or are you just talking if you do not get filled at the open for whatever reason?

Hey @Roller_1, the simple answer is I just don't have time to login and execute trades until my lunch break. I work an 8:30am - 5:30pm job.

 

[Roller_1]

Hey @Roller_1, the simple answer is I just don't have time to login and execute trades until my lunch break. I work an 8:30am - 5:30pm job.

Can’t you place them the night before though? With a limit order 5-10% above closing price. That will get you into the auction and gets you the opening price. Opposite for sells. Just a thought

 

[Warr87]

Beginning of month 23

Was a bit of a shocker when I checked Thursday night. Had to double check my numbers. When I saw Cam's results, they are similar. I also saw an article yesterday that stated that in the US market, it is the largest half-year drop in a very long time. My daily trade strategy also lost all of its open profits over the last 2-3weeks. I didn't expect my monthly to be so dramatic. My account is actually still larger than what it was when I started trading in it 22months ago -- which is my monthly contributions from my employer. While in some ways the monthly contributions help with compounding the wins, in this case it appears to be compounding the losses too.

I don't have much to really share this update. I have already made a mistake as I wasn't able to put in my trades on Friday due to work (it's a busy time of year, as it is for most). I looked at my backtests for the strat and historically an average of 4 negative months. 6 negative months was the cap from what I remember. Either way, I continue on and wait for things to settle down and momentum to the up-side to return.

-19% this month whereas XKO lost 10%.

 

[Warr87]

I note the sudden concerns regarding "slippage".



That was posted at Month 1, then at Month 22, this



IMO yes, you can fix this. Modify your stock universe to hold only those with enough market liquidity so that your orders can be transacted immediately.

I don't want to be seen as too critical when the system is in a draw down. The market provides it's most valuable lessons when it knocks us down. In this case there are several lessons. You need to eliminate the "slippage" concern by only trading highly liquid stocks. If a price does gallop away from your buy limit, buy the next one on your list.

My other concern is considerably harder to manage but becomes more significant if you're adding more capital and plan on adding more when transitioning to a SMSF. It's known as "Sovereign Risk". Do you want to invest your SF in companies that operate in countries with a low regard for democracy and rule of law? (AVZ).

This concern is reduced in a portfolio with many positions. This portfolio only carries ten, so when something catastrophic happens it's going to effect 10% of your portfolio.

Any trader or investor can be caught by sudden adverse events. I have a position in PET which has been suspended for years after a Chinese director operating in China stole from the company. Aust directors have no chance of getting that stolen money back.

@Cam019 is operating a monthly portfolio with only four positions (25% ea). I hope he has considered these concerns as well.

Sorry it took so long to get back to this. The slippage return is more the fact it can take days to wait for my trades to settle. I can't send in MOO orders with my broker. And if I get swamped at work and can't put in my trades during market hours (as you can't do so out of market hours), these can compound. Whether this is 'slippage' may not be the correct term.

 

[Warr87]

Can’t you place them the night before though? With a limit order 5-10% above closing price. That will get you into the auction and gets you the opening price. Opposite for sells. Just a thought

I have tried that on occassions, and for whatever reason, still can't get fills. But the interface from ING isn't meant for regular buy/sells even though its monthly. Frustrating to check when you're home to see you still don't have fills. So like Cam, I have this issue.

 

[Roller_1]

I have tried that on occassions, and for whatever reason, still can't get fills. But the interface from ING isn't meant for regular buy/sells even though its monthly. Frustrating to check when you're home to see you still don't have fills. So like Cam, I have this issue.

Yeah right. I guess change brokers if possible?

 

[Warr87]

Yeah right. I guess change brokers if possible?

That is the goal. But it's a super so needs to be done through an accredited super fund that will allow me to trade (like who I'm with right now), or a SMSF where I can choose whatever broker I want (will be IB). But I don't have high enough account to warrant the cost of a SMSF just yet. So I'm stuck where I am for the moment.

 

[Roller_1]

i think some people use sealfwealth for super

 

[Warr87]

i think some people use sealfwealth for super

That's just another broker isn't it? It needs to be an actual super fund for it to hold my super account.

 

[rnr]

That is the goal. But it's a super so needs to be done through an accredited super fund that will allow me to trade (like who I'm with right now), or a SMSF where I can choose whatever broker I want (will be IB). But I don't have high enough account to warrant the cost of a SMSF just yet. So I'm stuck where I am for the moment.

Hi @Warr87,
I thought that IB was a problem with "Australian based super funds" on the basis that the funds are not actually segregated and kept in an account in the name of the SMSF?
Just a suggestion that you clarify this issue thoroughly prior to going ahead.
Cheers, Rob

 

[Warr87]

Hi @Warr87,
I thought that IB was a problem with "Australian based super funds" on the basis that the funds are not actually segregated and kept in an account in the name of the SMSF?
Just a suggestion that you clarify this issue thoroughly prior to going ahead.
Cheers, Rob

Hey Rob,

My current account with IB is a trust account. I thought the SMSF was treated the same as it is a type of trust. My current trust has accounts in its name, or in the name of the trustee that runs it. When I've looked in the past it didn't look like an issue but it may be. I'll be sure to do more research when that time comes. At the current rate, I'm thinking 12months if it's a phenomenal run/rebound, but likely closer to 18-24months from now. Still plenty of time to figure it out (and wait to see what gov does with super's moving forward as well).

Thanks for the headsup

 

[KevinBB]

@Warr87 @rnr

IB seems to think that their account complies with Australian SMSF regulations:
"Our SMSF account is designed to enable compliance with the applicable regulations governing superannuation funds in Australia."

See this page. Right down the bottom, after all the advertising blurb.

KH

 

[Warr87]

@Warr87 @rnr

IB seems to think that their account complies with Australian SMSF regulations:
"Our SMSF account is designed to enable compliance with the applicable regulations governing superannuation funds in Australia."

See this page. Right down the bottom, after all the advertising blurb.

KH

thanks mate!

 

[KevinBB]

NP. The only problem I have with holding stocks, and in particular ETFs, in IB is their tax reporting.

The one financial year that I did hold IOZ plus a couple of dividend paying stocks in an IB account, it was a battle to get any sort of franking information out of IB. The annual trust tax statement didn't exist, so I had to calculate all the values myself. They do have an annual report, but it doesn't give all details required for Australian tax.

So ... I moved all ETFs and stocks back to an Aussie broker.

KH

 

[Warr87]

NP. The only problem I have with holding stocks, and in particular ETFs, in IB is their tax reporting.

The one financial year that I did hold IOZ plus a couple of dividend paying stocks in an IB account, it was a battle to get any sort of franking information out of IB. The annual trust tax statement didn't exist, so I had to calculate all the values myself. They do have an annual report, but it doesn't give all details required for Australian tax.

So ... I moved all ETFs and stocks back to an Aussie broker.

KH

Well my family trust uses IB. I figure it will actually be easier using IB since the EOY report from CMC wasn't particularly helpful for my accountant. The round trip of trades had to be put together and was a lot of effort. And it took my account more time to put it together as well (so cost more ... it was definitely a process). Will see this year I guess. Either way, I definitely prefer IB over other brokers I've used so far.

(Also, with the SMSF, I will be leaving it open if I trade futures or other types of instruments. That's pretty far off though. But IB makes that all easier IMO.)

 

[KevinBB]

Well my family trust uses IB. I figure it will actually be easier using IB since the EOY report from CMC wasn't particularly helpful for my accountant. The round trip of trades had to be put together and was a lot of effort. And it took my account more time to put it together as well (so cost more ... it was definitely a process). Will see this year I guess. Either way, I definitely prefer IB over other brokers I've used so far.

(Also, with the SMSF, I will be leaving it open if I trade futures or other types of instruments. That's pretty far off though. But IB makes that all easier IMO.)

I'm quite happy with IB. Its where I have my futures trading account. The reporting is excellent. I've been checking every trade all year (FY 2022), and everything matched my records. They do have a problem with rounding, but that's neither here nor there.

The annual trust tax statement didn't exist

When I was referring to an Annual Trust Tax statement, I was referring to the statement that an ETF or Trust, for example a listed property trust, is required to issue to all their unit holders at year end. It contains all the unit holder's tax return information. During the tax year in question (FY 2021) my IOZ and property trust holdings with IB didn't issue this tax statement, but those held with NABTrade did.

When I questioned both IB and the registry about this, they said it had something to do with how IB holds and accounts for all of this. I wasn't happy, as I had to compile all the (for example) IOZ tax information from their individual reports during the year. It wasn't an easy task going through each generalised distribution notice and picking the information that referred to my individual holding.

And, that's why I moved all shares, and units in ETFs and property trusts, back to NABTrade. I get one report from each ETF or property trust at year end, and the figures from that go straight into my tax return.

KH

 

[rnr]

I'm quite happy with IB. Its where I have my futures trading account. The reporting is excellent. I've been checking every trade all year (FY 2022), and everything matched my records. They do have a problem with rounding, but that's neither here nor there.



When I was referring to an Annual Trust Tax statement, I was referring to the statement that an ETF or Trust, for example a listed property trust, is required to issue to all their unit holders at year end. It contains all the unit holder's tax return information. During the tax year in question (FY 2021) my IOZ and property trust holdings with IB didn't issue this tax statement, but those held with NABTrade did.

When I questioned both IB and the registry about this, they said it had something to do with how IB holds and accounts for all of this. I wasn't happy, as I had to compile all the (for example) IOZ tax information from their individual reports during the year. It wasn't an easy task going through each generalised distribution notice and picking the information that referred to my individual holding.

And, that's why I moved all shares, and units in ETFs and property trusts, back to NABTrade. I get one report from each ETF or property trust at year end, and the figures from that go straight into my tax return.

KH

Hi @KevinBB,

From comments I have read over time on ASF regarding IB I have come to the conclusion that IB Australia uses their own HIN for all transactions made on behalf of Australian clients (but there again I could be a way off the mark).
It is with this in mind I raise the issue of segregated funds, although my terminology may not be correct as in IB's records they would have a breakdown of each clients balance and transactions and hence the red bolded comment above.
Just a suggestion that you clarify this issue thoroughly with regards to Australian legislation prior to going ahead.
Cheers, Rob