SAFE settings
My SAFE settings are now determined algorithmically.
All SAFE settings are rounded to the nearest whole number.
Firstly, the size of SAFE is determined by the relative volatility of the holding. I have assumed a setting of 7 for the broad market (S&P 500), and the setting for various funds is determined from their 1 year volatility as compared with that of the S&P 500, with more volatile funds having larger SAFE settings. Bond funds can have quite small settings. These figures are updated monthly.
(It occurs to me that using the S&P 500’s volatility as a constant, even though it obviously isn’t constant, might be inappropriate, and a fixed standard would perhaps be more logical.)
Secondly, the split of 2xSAFE between the buy and sell sides is determined by where the fund is in what I perceive to be its range. At present the 1999 and 2007 tops and 2003 and 2009 bottoms provide a relatively clear cut way of determining this, with a more recent high being used if a higher one has been reached. I update these weekly, and can do so more frequently if there are any sudden large changes.
On the above basis I currently have a sell SAFE of 0 for my UK mid-cap index fund holding, which is virtually back at its 2007 high, and I have just executed a 6.5% sale of that fund using this setting. The buy SAFE for this fund is currently 15.
Settings for some other funds are as follows:
Global emerging markets index: Buy 13 Sell 6
Gold mining stocks fund: Buy 15 Sell 6
Gilts index fund: Buy 3 Sell 1
Index-linked gilts index fund: Buy 7 Sell 1
American equities index fund: Buy 7 Sell 3
European equities index fund: Buy 10 Sell 9
Japanese equities index fund: Buy 1 Sell 10
Pacific equities index fund: Buy 14 Sell 3
I hope that this fine-tuning of the standard SAFE settings will be appropriate to the individual funds, and also provide appropriate adjustments for market conditions – but I’m open to constructive criticism!
Daisy
