Unique Application Of Moving Day Average To High Yield Bond ETFs

The moving day average (MDA) has long been recognized as a simple tactical growth and risk mitigation strategy for retirement portfolios. The basic idea is to be in a stock/ETF when it is above the MDA, and to be out of a stock/ETF when it is below the MDA. Research has shown that large drawdowns can generally be avoided and overall total returns improved by using the MDA strategy. The most common MDA used by strategists is the 200 MDA. It is very obvious that many investors utilize a 200 MDA strategy because of daily stock market action when the stock/ETF approaches and/or goes below the 200 MDA. Other strategists, such as Mebane Faber, prefer a monthly moving average and monthly updating strategy to avoid excessive trading caused by daily volatility of the stock/ETF. Based on extensive research, Faber recommends using a 10-month moving average (MMA) strategy with monthly updating... Read more