My thoughts on “Go-In-Cash”

Most of my systems tend to be market-timing strategies. That is, they enter the market and usually exit within a couple of days. This has the benefit of having limited exposure in the market and during non-trading periods the capital can be used for alternative strategies/investments. However, I have noticed that even when running several strategies, I am in cash a significant moment of the time.

My main worry is that during those periods, I do not generate a return on my capital. Yes, theoretically one could be getting some interest on their savings account, however as I need my cash to be ready-to-go-in at all times, I need to keep it at my IB account. And IB does not give interest on this account. So I started to play around with the thought of moving into a low risk asset class as an alternative to moving money into a savings account (which in reality I am not able to do – it takes two days to transfer money from IB to my Dutch savings account and another 2 days to get it back).

Having a preference for trading ETF’s, I ended up with the idea to go long in a fixed income ETF during the times that my strategy is in cash. The ETF’s that I have selected are SHY (iShares Lehman 1-3 Year Treas.Bond), IEF (iShares Lehman 7-10 Yr Treas. Bond) and TLT (iShares Barclays 20+ Yr Treas.Bond).

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