Low-Risk investment strategy ?

aliciathyme

Thrugelmir wrote: »

So you held no bank shares and had no holding in BP ?

BP never showed up as a potential holding
There were several bank deals as listed below, which accounted for 4 of my 10 stoplosses
Inspite of the dreadful performance of banks, their overall result was a loss of just 2.3%.


BARC Db 24-12-07 Ds 17-06-08 Bp 523p Sp 307p NR* = -37.8%
RBS Db 24-12-07 Ds 27-05-08 Bp 4338p Sp 2560p NR* = -41.2%
RBS Db 17-06-08 Ds 24-06-08 Bp 2123p Sp 2293p NR = 7.3%
BARC Db 21-07-08 Ds 01-08-08 Bp 261p Sp 339p NR = 29.3%
BARC Db 01-08-08 Ds 10-10-08 Bp 339p Sp 285p NR* = -13.2%
LLOY Db 05-03-09 Ds 24-03-09 Bp 40p Sp 58p NR = 43.2%
HSBA Db 20-04-09 Ds 07-05-09 Bp 447p Sp 541p NR = 20.2%
LLOY Db 26-03-10 Ds 04-08-11 Bp 64p Sp 36p NR = -45.4%
LLOY Db 01-08-11 Ds 21-11-11 Bp 41p Sp 23p NR = -44.3%
RBS Db 05-08-11 Ds current Bp 280p Cp 298p NR = 5.5%
BARC Db 08-08-11 Ds 18-01-12 Bp 182p Sp 198p NR* = 9.2%
BARC Db 28-10-11 Ds 28-03-12 Bp 203p Sp 247p NR* = 22.8%
RBS Db 18-01-12 Ds 24-09-12 Bp 246p Sp 268p NR = 8.5%
RBS Db 18-09-12 Ds current Bp 266p Cp 298p NR = 11.2%


Db = date bought
Ds = date sold
Bp = buy price
Cp = current price
Sp = price sold
NR = net return
NR* = net return including dividend received

Alicia

srcandas

aliciathyme wrote: »

There were several bank deals as listed below, which accounted for 4 of my 10 stoplosses

While the weighting of each investment is unknown it is obvious you have made huge losses on banks. Can I ask where you made a profit?

:beer:

Thrugelmir

aliciathyme wrote: »

Inspite of the dreadful performance of banks, their overall result was a loss of just 2.3%.

Makes this seem even more unbelievable then .

currently my 5 year investment is showing 332% net profit,

No holdings in Standard Chartered?

bowlhead99

aliciathyme wrote: »

But what if you used your own stock picking criteria and applied my Sell-to-Buy strategy. Would you have done any better??

Your strategy is to buy whichever stock gets emailed to you out of your proprietary software, and fund it by selling your best performing stock. I have a different method of selecting components of my portfolio but I can say that if I funded each of my purchases by selling my best performing stock rather than my worst stock, my overall result would not be better, it would be worse.

You should be not be arbitrarily disposing of stocks which have performed well and might be well placed to continue to perform well. If you need funds, you should take them from the stocks projected to perform the least well going forward (adjusted perhaps for perceived differences in risk as safer companies may grow less and are not necessarily a bad thing to hold).

As mentioned - you claim to be smart enough to have built a proprietary stock picking system which contains 10 years of data and updates itself with new data coming in and emails you hot tips based on trends and statistical performance (on the basis that 'trends' are a way of identifying prospective performance). So it's ridiculous that you would then say you are just going to arbitrarily sell a great performing stock because you have 'neither the expertise nor the time for research' and so have no clue which one you should sell. Rather than using your powerful statistical / trend-based / technical analysis system to identify the prospective performance of your existing stocks and then selling the one with the worst prospects.

For example you have a huge dataset, analyse trends, review 'anomalies in the pricing structure', perform Bollinger analysis, incorporate comparison with market trends etc etc to decide if there is something out there that you should buy instead of your existing companies. But you claim you can't use any of this type of analysis to decide which of the existing companies is the best to keep and which is the worst to keep, on the basis that you don't understand markets well enough and it's all a guess.

Simply making a guess what to sell next based on what has gone up the most recently and calling it a 'Sell-to-Buy' strategy and believing it will give you a better return with a lower risk profile than another strategy: that's flawed thinking. In the same way some people think they can get an edge over the casino by increasing their bet every time they lose a hand of cards, or others by increasing their bet every time they win a hand. They can call it a 'strategy' but it doesn't change the odds they experience on each and every hand.

lvader

It's just spreadbetting, it's easy to find a winner because they are the ones mouthing on about it, you don't hear from the 90% which are losers.

aliciathyme

Thrugelmir wrote: »

No holdings in Standard Chartered?

Yes, I overlooked that one. I made a 19.7% loss when I sold everything in the 2009 downturn.
Correction (misread my records) - that was Shell (RDSA), there was one holding of Standard Chartered and that made a Net Profit of 7%.

Alicia

aliciathyme

srcandas wrote: »

While the weighting of each investment is unknown it is obvious you have made huge losses on banks. Can I ask where you made a profit?

:beer:

If you read my previous posts you will understand that all the holdings have the same initial value (£10,500/3=£3,500) i.e there is no weighting differential.

All the banking transactions are included in the previous table (except for STAN which I overlooked) which shows where the wins were made to compensate for the "huge" losses to produce a MINOR overall loss in this sector. (demonstrating the power of the Rebuy process)

As you will also be aware, 81% of all transactions made a profit to produce the overall 332% net profit (which incidentally has today increased to 337%)

I have to comment that to run my stock picking system you have to have a cool head and just rely on the numbers, ignoring any impulse to buy or sell for any other reason.

If someone can tell me how to include a table I could post all the transactions for the sceptics out there - BUT ACTUALLY, I was never trying to teach anyone how to pick stocks as I assume you all have your own methods - I wanted to know if anyone else had experience with Sell-to-Buy concept for increasing the long-term returns (most of the profits are small, but the turnover is high. i.e If I can make 10% ten times in a year by selling one to buy another I will have doubled my money).

Alicia

aliciathyme

bowlhead99 wrote: »

.........So it's ridiculous that you would then say you are just going to arbitrarily sell a great performing stock because you have 'neither the expertise nor the time for research' and so have no clue which one you should sell. Rather than using your powerful statistical / trend-based / technical analysis system to identify the prospective performance of your existing stocks and then selling the one with the worst prospects.

For example you have a huge dataset, analyse trends, review 'anomalies in the pricing structure', perform Bollinger analysis, incorporate comparison with market trends etc etc to decide if there is something out there that you should buy instead of your existing companies. But you claim you can't use any of this type of analysis to decide which of the existing companies is the best to keep and which is the worst to keep, on the basis that you don't understand markets well enough and it's all a guess.

Simply making a guess what to sell next based on what has gone up the most recently and calling it a 'Sell-to-Buy' strategy and believing it will give you a better return with a lower risk profile than another strategy: that's flawed thinking.

You are quite right, but it's not flawed thinking. I have been developing my software over several years as a part-time self taught hobby, and I have decided that the performance is well good compared with commercial funds (as I presume you agree - I note that you didn't react to my comments about the performance of fund managers) without my spending hundreds more hours looking for even better returns by further enhancing the sell strategy. I get more than enough out of fast turnover of small profits.

I have developed my software using reams of data which I have modelled extensively with various "what if" scenarios. And since I started using the system for real 5 years ago there have been a few tweeks to get to the current system. But none of the processes project forward, they are all based on what has happened in the past. The very worst that could happen is that you might get a continuous series of 40% cutloss returns, and that has never happened in the last 10 years of data across all the FTSE 100 companies, regardless of when you start the 5-year cycle.

If I understand you correctly, you say you have looked at applying my Sell-to-Buy system with your stock picker and produced a worse result. That's not what I wanted to hear of course and I would be interested to know what you did and why it didn't work for you.

Alicia

aliciathyme

lvader wrote: »

It's just spreadbetting, it's easy to find a winner because they are the ones mouthing on about it, you don't hear from the 90% which are losers.

Explain please ?

Alicia

bowlhead99

aliciathyme wrote: »

I have to comment that to run my stock picking system you have to have a cool head and just rely on the numbers, ignoring any impulse to buy or sell for any other reason.

Ah, the blind faith encouraged by those who sell stockpicking systems.

In this system, it's simply a case of "Buy what the computer system tells you when it tells you, because the historic market data is a great guide to what is going to happen next". There is of course no guidance from the computer system as to when these stocks are no longer worth keeping, with the excuse that "historic market data is no guide to what is going to happen next"....

This system which finds entry points is apparently not supposed to produce exit points, you should keep the shares indefinitely. Unless the system says you need to find some cash for a new investment - in which case you should just sell whichever share is most in profit, with no regard to the timescale the profits have been generated over and therefore no real regard to relative performance between your holdings.

So you have three shares, A has done 15% in 4 months, B has done 17% in 8 months and C has done 2% in a year. A is the best and C is the worst. Without consulting technical analysis to rank the shares like you did when buying, you simply sell B because it has the most amount of pounds profit. This is not a system this is guessing.

I have developed my software using reams of data which I have modelled extensively with various "what if" scenarios. And since I started using the system for real 5 years ago there have been a few tweeks to get to the current system. But none of the processes project forward, they are all based on what has happened in the past.

They are projecting forward enough to tell you that you should buy a stock because it will be successful based on historic data. All stockpicking systems make predictions about the fortunes of a potential stock within the universe of the 100 stocks available at that time.

I wanted to know if anyone else had experience with Sell-to-Buy concept for increasing the long-term returns (most of the profits are small, but the turnover is high. i.e If I can make 10% ten times in a year by selling one to buy another I will have doubled my money).

If I went to a casino with $10000, betting $100 a time I could have a rule that when I had made a profit of $500-600 I would leave. When I walk into the next casino I will have $10500 or $10600 so I can either make $105 bets, or stick with the $100 bets, and stick with the rule that when I make a small percentage profit I will be willing to leave if the next casino calls me.

As the point at which I'm willing to take profits is lower than the point at which I would take a loss (-$4000), most of the time I will win. Perhaps 81% of the time. If I keep using this 'little and often' rule and ploughing my winnings back into my bankroll to finance further casino trips, I will hopefully increase my bankroll to $20,000.

Of course, changing the betting strategy one way or another does not improve the odds of a hand of blackjack or a roll of the dice and I am no more likely to make money in the long term if the odds are not in my favour. In a rising market the odds are in your favour so the system can appear to work, winning 81% of the time and up overall. But the long term result of whether you are above or below the general stock market performance, or above or below the expected casino 'house edge' is due to luck and absolutely not to do with the 'Sell to Buy' killer strategy.

Alicia[/quote]

aliciathyme wrote: »

I have decided that the performance is well good compared with commercial funds (as I presume you agree - I note that you didn't react to my comments about the performance of fund managers)

We can see you were lucky enough to outperform the fund managers. I explained for the two specific fund managers you mentioned who had shown very good returns why their returns had been delivered with lower risk.

The very worst that could happen is that you might get a continuous series of 40% cutloss returns, and that has never happened in the last 10 years of data across all the FTSE 100 companies, regardless of when you start the 5-year cycle.

If you pick 3 40% losers in a row you need 17 10% winners in a row to get back to where you started. Unless the markets are going up rapidly, this is a gamble. In a rising market there is less risk of ruin from employing high risk strategies and there have been some phenomenal returns by some professional and amateur investors in good years. They wouldn't necessarily be able to market themselves to the general public as low risk funds, which is why your returns appear higher than those you see run by retail fund managers.

If I understand you correctly, you say you have looked at applying my Sell-to-Buy system with your stock picker and produced a worse result. That's not what I wanted to hear of course and I would be interested to know what you did and why it didn't work for you.

I had a very quick sense check of the consequences of selling my good investments to fund new ones and in many cases it did not stack up. I have explained the logic, and agree with Grey Gym Sock that locking in profits is one way of funding diversification but with a sensibly sized portfolio it makes less sense to use this arbitrary method to decide which investments should no longer be a part of your portfolio.

By the way, I really appreciate your insights and the time you are spending on all this.

Alicia

It's a public service, I think it's important to help educate people to challenge marketing material provided by tipster services and sellers of betting strategies / trading strategies. If you're not one of these, then fine - but whether someone comes to me selling a strategy for a profit, or offering a strategy as a friend, I would not put my cash into it until I had kicked it to see if it would fall down.