Frequently Asked Questions

How can Beat The Dow help me make more effective investment decisions?

The tri-colored GO Charts at Beat The Dow offer buy/hold/sell recommendations along with the relative strength momentum of specific equity investment options available in most brokerage accounts. Beat The Dow also provides several specific trading strategies, called Model Portfolios, to follow or to use as benchmarks against which to compare your own performance. In addition, Beat The Dow highlights the status the NYSE Summation Index--perhaps the single best gauge of the strength of the U.S. stock market--and tracks recent changes in status of a dozen or so market timing signals.

Can Beat The Dow customize recommendations for me regarding trading strategies or fund selections?

Beat The Dow tracks Model Portfolios designed to employ the principles of fund rotation and market timing to advantage and provides a rationale for distinguishing between more aggressive and more conservative investment strategies, but Beat The Dow is not licensed to provide personal financial advice.

You use Compound Annualized Gain to measure investment return and Maximum Draw Down to measure investment risk. What is Maximum Draw Down?

Maximum Draw Down is the greatest percentage prior-peak-to-subsequent-valley decline suffered by an investment during a specific timeframe. Maximum Draw Down may be applied to an individual stock or mutual fund, a specific trading strategy, or an entire portfolio. It provides an easy-to-grasp, absolute measure of risk to which any investor can relate. This makes Maximum Draw Down a far more useful measure of risk than Beta -- which only measures the volatility of an investment versus a benchmark, such as the S&P 500 Stock Index. And it makes Maximum Draw Down a far simpler measure of risk than the Ulcer Index, which measures draw downs in terms of areas beneath a curve and, accordingly, is not easily explained or computed. An illustration of Maximum Draw Down is available by clicking here.

What do you mean by Relative Strength Momentum and how is it determined?

We use the terms Relative Strength, Momentum, and Relative Strength Momentum synonomously. The momentum of an equity is determined by dividing a Fast Exponential Moving Average of its price by a Slow Exponential Moving Average of its price. In graphical terms, the higher the momentum, the greater the relative distance between the faster average's curve and the slower average's curve. Momentum is calculated for a given fund based solely on its own price history and without regard to the value of any other fund or index. Once absolute values are computed for the momentum of all the equities in a group such as Single Country ETF's, or ProFunds Sector Funds, those equities may be ranked. Momentum ranking thus highlights equities whose past few days' performances have had the strongest positive (or strongest negative) effect on their performances over the past few weeks. In most cases, we use 4 market days for computing the fast moving average and 20 market days for computing the slow moving average .

What are the Merits of Following a Model Portfolio or Fund Trading Strategy?

In the sense that following no strategy is in itself a strategy, every investor uses some strategy. The Model Portfolios (or fund trading strategies) featured at Beat The Dow will, in most cases, enable investors to either improve returns, reduce risk, or both. The mere process of choosing among several proactive strategies like those featured at Beat The Dow forces investors to anticipate expected outcomes and to set viable goals. Selecting and following a strategy enforces discipline, removes doubt, and lessens worry. And adhering to the strategy will -- at the very least -- control risk. There are two types of models: Fund Rotation Models and Paired Equities Models.

What is a Fund Rotation Model?

Fund Rotation Models hold a portfolio of one, two, three or four equities at a time from a specific population of candidate equities. The number of candidates usually ranges from 3 to 100. Typically, as the number of equities held at a time increases, the risk and returns decrease when all other variables are held constant. Computer-driven decision rules select the best performing equities to buy and determine when current holdings need to be rotated to better performing candidates. Timing signals are usually employed to determine when all holdings should be rotated to the safety of money market funds and when all money market funds should be reinvested.

What is a Paired Equities Model?

Paired Equity Models trade back and forth between two equities depending upon the status of some signal. The signal may be based on the price performance of one of the equities, on the relative performance of the two equities, or on a general market timing signal. One model famous for deliverying high performance with low risk in the 1990's paired the Price Science & Technology Fund with a money market fund, and traded between them based on a general domestic stock market timing signal. Another famous strategy in the 1990's alternated between holding 100% Fidelity Select Energy and 100% Fidelity Select Air Transportaion.