iFlip AI – Tactical Model AI Update

iFlip Customers Update:

The end of the year is upon us. I’m sure we can all say what a difference 1 year makes. The iFlip team will now look back and review the performance of our models.  Although we have AI that does this for us behind the scenes more frequently than once a year. Let’s focus on the main model – the Flip Tactical Model aka the FTM.

I bring this up now because since 11/5/2019 just 28 days ago the FTM moved Customer’s investments to cash .. sensing too much probabilistic risk in the market.

A Year Ago

As many who onboarded last year know the FTM first moved out of the market through its proxy, the SPY, on 8/8/2018. And subsequently made three more small losing trades between 10/10/2018 and 11/14/2018, where it was subsequently out completely until February 2019. The end of 2018 especially the 4th quarter turned out to give investors a huge surprise by losing 20% by Christmas Eve 2018. The FTM by contrast gave away just 6% of its yearly gains. Good job FTM!

Lets look a little closer to get a more granular look at model performance relative to Buy & Hold market performance. As of August 8th last year when the FTM went into protection mode and moved to cash the S&P 500 has gone up 8.39%. This is calculated by the SPY price on 8/8/2018 of 285 and the current price as of today of 309. That’s 309-285=24 points => 24/285 = 8.39%. In contrast the FTM since that time has made 5 trades since that time:

Position Symbol Entry Date Entry Price Exit Date Exit Price Points
Long SPY 10/11/2018 277.08 10/15/2018 275.55 -1.53
Long SPY 10/18/2018 279.4 10/22/2018 277 -2.4
Long SPY 11/9/2018 279.03 11/14/2018 274.16 -4.87
Long SPY 2/14/2019 273.78 6/4/2019 277.12 3.34
Long SPY 6/6/2019 283.29 11/5/2019 307.59 24.3
18.84

For a total of 18.84 points => 18.84/285 = 6.61%

So, since 8/8/2018 the FTM is behind the Buy & Hold S&P by 1.79%.

Hopefully our followers see that this is NOT the whole story. Since August 8, 2018 the market has both fallen 20% and rose from its lows 32%! That’s a lot of volatility!

It’s unnecessary.

The FTM’s has experienced volatility since then of just 10% while holding a position that lost 10% from March to June earlier this year. So our users fell behind just 1.79% and only experienced one half the volatility of the market. This is precisely why we try to drive home the point that “we want our customers to know that at some time “t” in the future your portfolio will always try to be within 10% of its all time high”. Our core value is to Protect & Grow your portfolio – just grow it. See below :

The above is a long term chart of the FTM vs the SPY Buy and Hold Strategy. Notice how the FTM “protects by staying away from bad times yet grows by staying in during good times.

The chart above is a zoomed in picture of the right side of the chart above it (Blue line is SPY; Green Area is FTM). It shows from just before August of 2018 through today. The black lines show the growth of the FTM and SPY respectively. The red lines represent the range of dollars i.e. portfolio value, they each experienced. Notice how the slopes of the Black lines are about equal i.e. they went up almost the same (performance). But notice the experienced ranges are completely different (risk).

Proper risk management that can trade for you is superior to blind belief that the market will always just go up back up in the long run. Over time, the FTM has an expectation to outperform the market.

Now and Going Forward

The purpose of this letter again is too show that markets are always oscillating and have various degrees of risks.  Currently we are in such a time. It should be emphasized to all Flip and non-Flip users that performance is not a meaningful measurement without also assessing risk that must be taken to gather that performance. Moreover, performance must be measured point-to-point (When you start is point one) and not on some arbitrary date such as YTD or Quarterly.

I hope this article helps grow your understanding of performance relative to risk a little better. Please feel free to comment. On any thoughts you may have.

Lastly, look for the FTM to try to repurchase the SPY around the 301 area with risk down to the 292 area

Thank You!

Kelly Korshak

Co-founder / CTO

Appendix

For those like graphs the chart below shows a detailed look at what was emphasized in this short article.

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Zero-dollar ($0) commissions are available for self-directed Individual cash or margin brokerage accounts that trade U.S. listed securities via mobile devices and via web interface. To obtain the commission and fee schedule, please see our website at www.iflipinvest.com. Note that certain Flip Investor Inc. Product features listed are currently in development and will be available in the near future. System execution price, speed, response time, liquidity, market information, and account access times are affected by many factors, including market volatility, size and type of order, market conditions, system performance, and other factors. Some of the information provided show hypothetical results which may or may not represent live performance. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns.  Keep in mind that while diversification and the use of algorithms may help manage risk it does not assure a profit, or protect completely against losses, in a down market. There is always the potential of losing money when you invest in securities, or other financial products.  Investors should consider their investment objectives and risks carefully prior to investing.

Past performance is not indicative of future performance. iFlip data results assembled using various Flip algorithms applied to the equities listed on this webpage (if any). Results compiled for each equity and each algorithm assume a 10,000 initial investment beginning on Jan 1st 2005. A $0.01 / share commission applied. All iFlip price assumptions are based on the opening price of each day as found in Yahoo finance. Yearly NAV data points compiled by compounding annual returns using standard year over year accounting. S&P500 results are derived using the SPY as a proxy. The data on this webpage is not intended as a solicitation. Always seek professional advice for suitability.

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