The Praxis Seasonal Model - John Rothe | Portfolio Manager, Quant, Tech Geek, And Sometime Superhero To My Kids

The Praxis Seasonal Model


The first of the three investment models that make up the Praxis Fund is the seasonal model. This model is based on historic trends in the market. Studies have shown that the US stock market is stronger during certain times of the year. For example: from 1949 through the end of 2009, the average daily gain for the Dow Jones Industrial Index from November to May was 27 times higher than the average daily gains of all other days. During these six months of strength, the annualized rate of return was 17%.

Growth of $10,000

Growth of $1,000 invested in the Dow, May through October 31st. (1967-2010).

Chart courtesy from Optionetics

Our seasonal model takes this concept one step further. By examining the historical trends of various sectors of the market, we are able to invest in the strongest sectors during historically strong periods.

The Praxis investment model focuses on four sectors of the market that have shown the strongest historical trends: energy, technology, gold and cash.

The model is simple –

  1. Invest in the technology sector at the close on the last trading day of October.
  2. Sell investments in the technology sector at the close on the last trading day of January and invest in the energy sector.
  3. Sell investments in the energy sector at the close of the last trading day of May and hold cash (or money market) during June, July and August.
  4. Invest in gold at the close on the last trading day of August.
  5. Sell gold at the close on the last trading day of September and hold cash during October.

By following this seasonal methodology, the model has provided above average returns in the current secular bear market:

$10,000 invested from 2000 to end of 2009

During a time where the rate of return for the S&P 500 Index provided a negative rate of return, the seasonal strategy has provided a much higher rate of return.

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