Buy and Hold vs. Moving Average ETF Investing 2-26-10

Happy birthday ETF Newsletter! It has been 52 weeks since we started comparing a Buy and Hold ETF investing strategy against a moving average strategy. Even though it's been a year, it is still to early to determine which is the better strategy. For the year, the Buy and Hold investor made about $4780 dollars for a hefty 47.6% gain. In comparison, the Moving Average investor made about $775 for a 7.7% gain. (Each investor started with $10,044.)

While the Buy and Hold investor has clearly done far better, there are a couple of key points to keep in mind. Buy and Hold jumped into the market 100% at what turned out to be the bottom of the bear run back in March 2009. It was pure luck that he hit the bottom.

The other key point is that the Moving Average investor had to wait for the 50 day moving average to cross above the 200 day moving average before entering into any of the ten ETFs from the balanced ETF portfolio. As a result he paid more per share than Buy and Hold.

The true test will come when the Moving Average investor sells ETFs and then re-buys depending on the 50 day/200 day investing strategy (which will occur during future bear markets or down turns and then subsequent rallies). This will be very helpful in determining which is the better strategy. (One other point to note: I am only tracking price moves, I am not accounting for dividends in this comparison.)

Weekly Update:
The S&P 500 was down 5.5. points this past week. The buy and hold ETF investor saw a decrease of about $20 in the balanced ETF portfolio. His total portfolio balance is currently $14,822 and the total gain is 47.6% since we starting tracking this portfolio in March of 2009 (52 weeks ago).
The moving average ETF investor lost about $13 for the week. His portfolio is now valued at $10,818 (same balanced portfolio). He has gained 7.7% for the same 52 week period. The most recent 12 weeks is shown below.