Pointless moves in-out of the HST model

During recent days of early September 2020, we see that the HST model is moving around its shift level between Aggressive Long and Cash positions. And this entering / exiting the market is not really productive, as we can see.

After all, it might be better to stay "IN" all the times with Aggressive Long positions, and simply accept the small fluctuations of the market, aiming to the long-term result, which is an amazing compound profit on investment.

This is some how true, see a comparison between the HSTv2 model =red line (using 3x leveraged ETFs) and a simple Buy & Hold strategy with $TQQQ = blue line on last 4.5 years 2010-2020

Easy to see that the HSTv2 protected the investor from the hardest drawdowns of 2016, late 2018, early 2020. But the two ending points are not so far, and a B&H strategy is WAY easier to apply (no need to trade anything in years!)

The outcomes dramatically change dramatically if we open the window wider in time, as period 1971-2020.

During these 5 decades markets passed through bull markets, bear markets, flash-crashes (Oct 1987), financial crisis, political crisis and many other conditions.

Note: the ETF $TQQQ was born on 2010, so the HSTv2 and $TQQQ performances are calculated simulating a hypothetical ETF performing like $TQQQ performs now =~ 3x Nasdaq on daily basis.

• On the right side (after purple vertical line), we see the secular bull market started in 2009 and still ongoing. During this period you see that (virtual) HSTv2 and (virtual) B&H-$TQQQ are not very different: the slope (= average yield) is very similar on this logarithmic chart.
• In the yellow area ther is the "lost decade" 2000-2009, and here you see a huge difference: the (virtual) $TQQQ was literally destroyed by the crashes of 2001-2002 (-78%) and 2008-2009 (-94%).
  This is a simulation, but a "real" ETF - if only it existed at that time - would probably have been delisted or bankrupted.
  During same, ominous decade, the HSTv2 held its positions, gaining 15-16% (per year) on average
• During previous 3 decades (1971-2000), the HSTv2 was outperforming the B&H on $TQQQ by far, because it skipped to Cash during bear markets and significant corrections.
  Note, in the red circle, the Black Monday of October 1987, when the HST model was already in Cash position

Bottom Lines

• Leveraged ETFs as $TQQQ are high-risk tools, and should be used only on a minor part of personal investments. In flash-crashes like 1987 they can be almost annihilated.
• Many say that leveraged ETFs should not be used for mid or long-term investment.
  We disagree with these opinions, if we talk about ETFs bound to broad indexes and with sufficient liquidity. No need to remind that the REAL $TQQQ was initially priced $1.6 on Feb 2010, and it is now $133,5 (+8.100%).
• But a simple Buy&Hold strategy applied on a leveraged ETF like $TQQQ - which has performed so well in last decade - could destroy investor's capital in few weeks of a bear market. Investors need to get out during these periods.
• The recent shifts of the HST model between "Cash" and "Aggressive Long" are annoying, but they are a sort of protection for this risk. They pay back investors if/when a real crash happens, acting like a "stop-loss". They can reduce the risk of a massive loss.
• Past performance is no guarantee of future results

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