The goal of this strategy is to maximise diversification with a lowered tracking error in order to improve the information ratio. Indices are based on the Diversified Benchmark approach, constrained to fit the requirements of replication. Important Information: Capital at Risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. The fund invests in financial instruments which are denominated in other currencies; as such changes in the relevant exchange rate will affect the value of the investment.
Investors should understand that capital growth is not a priority for the Fund and that income levels will vary and are not guaranteed. Ground Rules:. Just type and press 'enter'. Diversified Benchmark Range of Indices. Base Date : Launch Date : Level : Number of Constituents : Market Cap : 2, Market Cap : 2. Market Cap : Top Constituents.
Next I go live with my strategy on PyInvesting which implements my strategy by pulling live prices daily and generating orders for me to trade on my Interactive Brokers account. All I need to do is to open my email and execute the trades. Moving on, what investment strategy do I use? I buy stocks that have been going up and I sell stocks that have been going down.
Trends exist everywhere. We have fashion trends, social trends, weather trends, heck in this age of technology we even have Google search trends. Similarly, trends exist in the stock market. Statistics show that when a stock has been going up for a period of 6 to 12 months, it tends to continue going up. I identify trends using moving averages.
A moving average is an average of prices within a window of time black line. Conversely when its price is below its moving average, the stock is trending downwards. Longer term trends are more stable and less noisy. Hence the day moving average MA is where I draw the line in the sand. Any stock that is above its day moving average, I will consider to include in my portfolio.
Any stock that is below its day moving average, I will sell if the stock is in my portfolio. Fundamental Analysis After filtering for stocks in a long term uptrend, I rank the stocks using fundamental analysis. This is done by creating a signal for each stock based on their fundamental data. I use 3 factors to create my signal. The lower the PE ratio, the cheaper the stock relative to its earnings which is great for investors. ROE is a measure of how efficiently a company is able to use its resources.
High quality companies tend to have high ROE. The third factor is profit growth which is a measure of how quickly a company is able to grow its profits. The value of your stock is highly correlated to the earnings of a company. Companies that are able to grow their earnings quickly tend to produce huge returns on their stock prices. By combining both technical and fundamental analysis, we are able to filter, rank and select the best stocks to include in our portfolio. Active Risk Management The next step is to apply an active risk management system based on market sentiment to protect our portfolio during a crisis.
The main idea here is that we want to take on more risk and hold more stocks when market sentiment is bullish. This is because during a bullish regime, markets tend to reward investors for staying invested. In contrast, when market sentiment is bearish, we want to take less risk by raising our cash allocation and holding fewer stocks.
This is to protect our portfolio from suffering huge drawdowns. For example, during March this year, my portfolio was almost completely in cash as market sentiment turned bearish.
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Subsequently, PyInvesting gradually started buying stocks and reducing cash to participate in the V shape market recovery that followed. Position Sizing The final piece of the puzzle is position sizing.
- Picking the Right Benchmark.
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I hold at least 30 stocks in my portfolio and equal weight each of them. Why do I do this? To avoid concentration risk. Because of that, I keep each position small so that my risk of being screwed by any single stock becomes very small. With 30 stocks, my portfolio sits at the yellow sweet spot in the plot below.
I get to reap most of the benefits of diversification where the volatility of the portfolio approaches the volatility of the market. The naive argument against holding 30 stocks in your portfolio is that no one has enough time to research so many stocks and that people who hold more than 10 stocks in their portfolio do not know what they are doing. My retort against people who make this argument is that we are not living in the age of the dinosaurs. Putting It All Together We covered multiple individual steps that contributed towards my overall portfolio strategy.
We started with identifying stocks that were in a long term uptrend.
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Next we ranked these stocks using fundamental analysis. Following which we applied an active risk management system. Finally we did position sizing to reduce concentration risk. Even though there were many steps involved. Implementing the strategy was a breeze using PyInvesting. I simply filled in a form to specify the details for my backtest and went live with my strategy on the cloud. I hope that it will be helpful to you in your journey towards financial freedom. Have you ever tried an investment strategy that was highly recommended, yet decided to quit once you started losing money?
What is benchmarking and benchmark strategies that appear in my strategies or portfolio?
I know I have. A buddy of mine who used to work at a hedge fund was preaching to me about his insane portfolio with super star stocks. For some reason I thought it would be cool to go along and invest in the same stocks as he did. And so I did. When I bought in, it happened to be a good entry point as the market was going up almost everyday. However as markets became highly overbought, a huge red day soon followed. I panicked and cashed out shortly after that.
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Overall, I stuck with the portfolio for three short weeks. While it was an exciting experience, never again would I invest in a strategy that I had no confidence in. How do I find a strategy that I can stick to, even when markets are volatile?
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