200 day Moving Average
motivated by a discussion on Bogleheads

Perhaps the simplest scheme for determining when to Buy and Sell is the 200-day moving average, so I thought ...

>Not again! Haven't you done that here and here and here and here and ... ?
Yes, but now I'd like to compare a Buy&Hold scheme with a 200-day Moving Average scheme.

So here's the spreadsheet:

  • You type in 30 stocks ... like, maybe, DOW stocks.
  • You pick some number of days for the Moving Average ... like 200.
  • You pick a couple of percentages ... like 1% and 2%.
  • You BUY when the stock price goes above the N-day MA by 1%.
  • You SELL when the stock price falls below the N-day MA by 2%.
  • Then you click a button and get the comparison(s):
  • Then you get a table which shows the Compound Annual Growth Rate (CAGR) for a $10K Buy&Hold portfolio vs a N-day MA portfolio.
>What's with the colours in the table?
That shows who gets the better CAGR and who has the smaller Volatility (or Standard Deviation).

>Does using a MA always give a smaller Volatility?
Usually, because there are periods when your MA portfolio don't hardly change ... 'cause you sold your stocks.

>Okay, so why the 1% and 2%?
That's to avoid "whipsaw" where the stock price moves back & forth across the MA and you Buy and Sell and Buy and ...

>And is using the MA better than Buy & Hold?
Play with the spreadsheet!
Try values other than 200 and different percentages and different time periods.
For example, the spreadsheet downloads 10 years worth of daily data ... ending "today". Try ending at some other time.

For example, if (instead of 1998-2008) we consider 1988-1998, we get this

>Mamma mia! That's quite a difference, eh?
Yeah ... them was good years. Take a peek at the DOW for each period. (That's ^DJI.)


Here are a few others for the last 10 years:
Using 1%, 2% and 100-day MA
Using 1%, 2% and 50-day MA
Using 1%, 1% and 200-day MA

You can also get a single stock download, with pretty charts ... but the table don't change unless you click the Download ALL button.

How about Mutual Funds?
motivated by Don's comments, on Bogleheads

Rather than comparing stocks, lets' try Vanguard Funds. Then we get the following:

Using 1%, 2% and 200-day MA
Using 1%, 1% and 200-day MA
Using 1%, 1% and 100-day MA

a modified Spreadsheet
The spreadsheet, illustrated above, has changed ... due to a request by finster.
As shown in the picture of the (modified) spreadsheet, above, the current Price and current MA are given for each of the stocks.
Further, the Price and MA are plotted for the last 30 (market) days.
Further, if the current Price is greater than the current MA, the Price is coloured green.

another Note:
While modifying the spreadsheet, the macro which coloured the current Price didn't seem to work proper-like.
Then I realized that no stock satisfied the requirement that current Price > current MA.
I searched for a stock that did, and found BUDweiser ... so I added it to the list of stocks.