buyOnDipsBetter.R

rm(list=ls())
library(quantmod)
library(lubridate)
library(PerformanceAnalytics)

#' Required 'drawdown' size
#' Default: -6% return
drawdownHurdle<- -0.06

# Grab data -----------------------------------------------------------------------------------
sp500<- getSymbols("^GSPC", from="1950-01-01", auto.assign=FALSE)
sp500$returns<- dailyReturn(sp500)

# Find all potential ‘dips’?  -----------------------------------------------------------------
allDrawdowns<- table.Drawdowns(R = sp500$returns,top = 1000)
allDrawdowns<- allDrawdowns[allDrawdowns$Depth<= -drawdownHurdle,]
head(allDrawdowns)

# Convert to DataFrame  -----------------------------------------------------------------
sp500<- as.data.frame(sp500)
sp500$date<- as.Date(row.names(sp500))
sp500<- sp500[,c("date","returns")]
head(sp500)


sp500$dip<- 0
for(i in 1:nrow(allDrawdowns)) {
  indexer<- which(sp500$date > allDrawdowns$From[i] & sp500$date < allDrawdowns$Trough[i])
  sp500$dip[indexer]<- 1
}
table(sp500$dip)

# Deposits ------------------------------------------------------------------------------------
deposit<- 500 
sp500$deposits<- ifelse(day(sp500$date) < c(NA,day(sp500$date[-length(sp500$date)])), deposit,0)
sp500$deposits[1]<- 0
sum(sp500$deposits)

calcFinalBalance<- function(returns,deposits) {
  depositIndex<- as.numeric(which(deposits>0))
  
  returns<- as.numeric(returns)
  finalBalance<- 0
  for(thisDeposit in depositIndex) {
    thisReturns<- returns[thisDeposit:length(returns)]
    cumulativeReturn<- tail(cumprod(thisReturns+1),1)
    value<-  cumulativeReturn * as.numeric(deposits[thisDeposit])
    finalBalance<- finalBalance+value
    rm(value)
  }
  return(finalBalance)
}


default_FinalBalance<- calcFinalBalance(sp500$returns,sp500$deposits)
default_growth<- default_FinalBalance/sum(sp500$deposits)

# Buy On Dips Only ----------------------------------------------------------------------------
#' A person holds cash until they both have cash, and are in a dip. 
sp500$cash<- 0
sp500$invest<- 0
for(i in 2:nrow(sp500)) {
  #' Simulate getting cash. 
  #' Note this is an accumulating function. 
  if(sp500$deposits[i] > 0) {
    sp500$cash[i]<- sp500$cash[(i-1)] + sp500$deposits[i]
  } else {
    sp500$cash[i]<- sp500$cash[(i-1)]
  }
  
  #Simulate new investment decision
  if(sp500$dip[i] ==1) {
    sp500$invest[i]<- sp500$cash[i]
    #' Reset Cash to zero
    sp500$cash[i]<- 0
  }
}
sum(sp500$invest)
sum(sp500$deposits)

buyOnDips_FinalBalance<- calcFinalBalance(sp500$returns,sp500$invest)
buyOnDips_growth<- buyOnDips_FinalBalance/sum(sp500$deposits)


# Results:  -----------------------------------------------------------------------------------
options(scipen=10)
default_FinalBalance
buyOnDips_FinalBalance
formatC(default_FinalBalance - buyOnDips_FinalBalance,format = "f" ,digits=0,big.mark = ",",)

default_growth
buyOnDips_growth
default_growth-buyOnDips_growth