Can the VIX Predict S&P 500 Returns? [1990-2023]
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- Опубликовано: 29 июн 2024
- Can you time the market with the VIX? I study it from 1990-2023. The results surprised me a bit. What do you think? Let me know in the comments down below!
00:00 - An Interesting Idea…
01:18 - What is the VIX?
02:36 - Results
04:50 - If you found this video helpful…
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Did these results surprise you at all? Let me know what you think! Thanks to everyone for your support of my work; I enjoy putting out this content for you all. Have a great weekend, everyone!!
No, I'm not surprised.
The long-term average of VIX is 14, and it spends MOST of time in the teens. If you sell when VIX is 'low' it may take a LONG time before you see it even close to 20s (look what VIX did in 2017).
What if you sold below if it went below 14 and then crossed it on the way up.
And then bought above 23 but wait if it is still going up until it turns down ( so if it keeps going to 50 you wait for a pullback of some % )
@janshuster1426
Doesn't work
For example: During 2017, vix averaged 11.09 and this would have kept you out of the market while it was going up and up ... Similar to 2005 and 2006 when vix averaged bellow 13.
etc.
@@ivantsanov3650
I'm not saying what I wrote would work but the idea is to buy after the VIX peaks and is dropping and hold it as long as it is dropping and sell it as VIX starts to go up.
So below 14 you would still own stocks.
Not at all!! I came to the same conclusion a few years back. However, buying the S&P 500 or stocks when VIX reaches more than 30 and holding them for more than 1 or 2 years use to bring very good results. The fear is the best way to use VX
Interesting discrepancy! Puts a lot into perspective
Thanks, Marko! Everyone go check out WhiteBoard Finance University! (Link in description.)
Can you do one on hedging a portfolio using far OTM put options?
The best strategy is:
Buy (regularly no matter what the vix dies) & Hold and when the VIX soars (e.g. above 18) just buy more!
Yes, this was surprising ! It seems like a similar theory to sell a stock when it hits the 200 SMA
Hey Nathan, another intriguing ‘strategy’ to back test if you’re interested and having the capability: Every year, on Jan 1, buy the top 10 performing stocks in the S&P500 from the prior year and sell at the end of the year (Dec 31). Not the stocks with the highest market cap, but the stocks within the S&P500 that had the greatest % return in the year prior. Found the strategy on Twitter and it resulted in a 37% CAGR over the last 10 years compared to SPY’s 12%. Would be cool to see how it compares 1) over a longer period of time and 2) before ZIRP. Love the strategy videos!
An interesting analysis would be what your return would be if you invest $500 per month either in S&P tracker or a Nasdaq tracker. You buy Nasdaq tracker every time the VIX index is high and a S&P tracker when the VIX is low. Compare the results when you only invest in a Nasdaq tracker or in a S&P tracker.
The VIX is calculated using option pricing on SPX, its safe to assume that there would be a closer correlation between the VIX and S&P500 then the VIX and Nas100
Great video, keep it up
I wish you would make more videos, and I would appreciate a video with your view on trading derivatives 🙏
Good info. I'll tuck this info away.
Some of the best days in the stock market have been when the VIX is at highs but right before that happens, the markets have already dropped. Time in the market is more important than timing the market. Personally, have a set dollar amount that you want to own in a stock or ETF then each pay period tuck money away to hit that target and if it drops use it to buy more. It is better psychologically because you won't emotionally go all in, you will buy more lower and on its way down if it continues. It can take 4-8 years for your portfolio to recover if you go all in on stuff and be fully invested. That is why 5-10% cash is better than covered call ETFs because all of a sudden, you aren't buying up in a bull market to keep it 10% and then you are buying on the way down. So in essence you psychologically buy low and hold high and dividend paying stocks will pay well.
Awesome video and analysis
Thanks!
Coffee Can approach and holding great stocks wins every time.
Absolutely!
Great work as always. If you ever want to make a video about Machine Learning Algotrading vs passive investing I'd be glad to assist you. Can't provide the code but could provide the predictions in full detail + simulated PnL chart
Interesting! How do you do that? What do you use?
What am I missing…….shout out to David….who is this?
Good points on this video…..imagine if Warren Buffet had buys and sells based on VIX.
Now try inverse of that strategy, you will get great results. However there's no guarantee it will still work going forward
I believe strongly that in the present day you can do well timing the market. (Because computerized trading can be predicted to a large extent, but the VIX is very unreliable, and actually indicates fear when markets are going up, and vice versa.) The market hits support and resistance levels almost to the penny. They also follow channels and bounce of the lows and highs. There is no reason for a person to take massive losses in today's markets. Thanks for the video.
Thanks, Bob! What systems do you use?
I don't use any indicators, I have evolved over the years, and maybe I would describe my strategy as a combination of Joseph Carson's compounders, and using Right Way Options swing trade ideas along with The Stock Channels analysis. I stick to companies that I trust, and sell on spikes and buy on dips. I think the idea that you can't beat the market is a bit outdated. Granted money managers don't do well, but a lot of it is the striving to please their customers, and the fact that the more money you manage makes it harder to do well. I didn't do very well, when I was paying commissions, but with commission free trading, I can do well. The traders who a trying to get rich quick are in for a sad awakening, and skew the averages.
@NathanWinklepleckCFA
Poor Bob has no 'sistem' to time the market because there's no such a thing (he just has an opinion) 😂.
I personally believe that Wright is wrong, but I could be wrong, so let's hear Wright. We all want to know Wright from wrong.
I'm not surprised.
The long-term average of VIX is 14, and it spends MOST of time in the teens. If you sell when VIX is 'low' it may take a LONG time before you see it even close to 20s (look what VIX did in 2017). On top of that, because of 0DTE options nowadays, the VIX will be less 'volatile' - will have lower 'spikes' and when it's 'low' - more often going below 14.
Excellent points!
Great scientific work! A Greek youtuber says to buy a short vix etf when vix is over 30
Send me a link, please.
Thank you in advance.
ruclips.net/video/Owu98pTpg0c/видео.htmlsi=KkYuPttVLJNll-Tq
This guy says that when VIX is over 30 you should buy SVXY because sooner or later volatility will decrease
I know dollar cost averaging is the best investment strategy, however, it seems like using the VIX as additional, 'in addition to your DCA' would be one way to do it. However, my thought is, do your regular DCA, and anytime the S&P drops 20% buy more than you normally would....to me that seems like the ideal strategy.
That would make sense, but where would you get the "more than you normally would" part?
@@NathanWinklepleckCFA always with the practicality. I dont know, perhaps cut discretionary spending in down markets specifically for that purpose. I was not an active investor until very recently, but it seems to me, If VTI (i like the vanguard total market ETF) was down 10 or 20%, id have to buy more. Its easy to say, and I dont know how id respond. But I do understand that the market has never been in a downtrend when looked at a chart where each bar is a single year. I figure that is why buy and hold is superior to timing.
Nathan what are your thoughts of financial & market analytics companies like S&P Global, MSCI, Morningstar & Nasdaq Inc ? From what I’m seeing even the largest fund managers in the world like Blackrock & Vanguard are essentially using their data and benchmarks to structure their own funds by and it seems they have some sort of ownership over these indices (which lets not beat around the bush the entire stock market relies on pretty fucking heavily). Some power plays there ?
I believe all this is way overblown. Blackrock and Vanguard are fund managers, which means they manage--not own--on behalf of millions of people who, collectively, own a large percentage of most companies. I don't see why people freak out so much about this situation.
@@NathanWinklepleckCFA well not so much about the fund managers, I don’t believe they have as much power as people say. But is there still merit in companies like MSCI or S&P Global ?
What do you mean by merit?
I currently have 4500 shares of SCHD! My goal is 5k shares. This is my retirement plan!! My portfolio consists of 200 voo 200 vug 150 vgt 4500 SCHD! Is the future bright,I wish to sell a couple of these shares and travel, I am just being cautious with ever rising costs.
Bother less and enhjoy the time you have left.
the size of your retirement portfolio will overwhelmingly be a function of the performance of the stock and bond markets between now and when you start withdrawing from it
You need a third party to help you out. A financial planner or accountant can run through your figures, including your projected income and expenditures when you retire, along with your retirement goals, your emergency fund and any other strategies you need to put in place for such things as long-term care.
Travel is a small but important part of that overall puzzle. Start with an annual budget for socializing and travel - $10,000 per year is a figure I picked out of the sky - and see how you get on with that over time. Agree to remain open to further conversations about adjusting that figure upwards or downwards.
With your retirement funds in your Traditional and Roth IRA accounts, we would recommend allocating the funds with 50% to a globally diversified stock portfolio with an overweight to the U.S., and 50% to a conservative, diversified bond portfolio all via low-cost mutual funds. The equities should provide growth potential and a longer-term hedge against inflation, while the fixed income should provide a steadier income stream and preservation of capital.”
I wonder how it would work if instead of holding cash, you held bonds, which has historically been negatively correlated with stocks.
This was using 3-month T-bills, but yeah that would be interesting