Hi Toofuzzy,
Your points are well taken and that is the direction I'm headed, in general.
As to knowing what the market is going to do, even the guru investors only get it about 60% right and then only for a while before they loose their touch. Hot fund managers are hired away by other funds and are not able to repeat their prior success. A study was done over several years that proved this. Not sure, but I think it was AAII that did the study. Disciplined investors can do about 40%. Most investors 30% or less, primarily because they are not rigorous about following a plan and they let their emotions get in the way of careful planning and following through with their plans.
As to the backtesting, it is only a way to select possible positions and how far one can go in terms of cash level. What I'm finding is that the 60+% is a bit high for stocks and leveraged ETFs and that 40% may be a bit low for plain ETFs. Most seem to need 43-5% over time.
But there is another point to the backtesting that you might not have thought of, the correlation between AIM actions an market direction or cycles. As karw has pointed out in his post, we may be near a market top. If he is correct then it would be foolish of me to buy positions that were likely to go down dramatically. Backtesting helps find positions with lower volatility for starting out. I can adjust slowly over time when market direction is clearer than it appears to be at the moment.
I'm not in such a rush to get into the market that I can't do it a bit at a time, learning as I go.
Best,
Allen
