Investing

Trading idea- Based on Graham (TSX)

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[OP]
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ksgill wrote: The worst part is that this model does not exceed in past or future performance. I automated my investments 10+ years ago and I haven't looked back. Numerous studies back what I am saying here, not sure what the fuss is about. It's your money, do what you want people.

Don't tell me that my 7000+ global stocks are riskier than your 10-20 in Canada.
Apples and oranges. Not discussing passive investing strategy with active trading on this thread. Create your own thread for that discussion, as this pertains to discuss the automation of Graham principles to individual stocks. If you think it's useless, then that's your opinion, no need to derail the thread.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
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rodbarc wrote: Apples and oranges. Not discussing passive investing strategy with active trading on this thread. Create your own thread for that discussion, as this pertains to discuss the automation of Graham principles to individual stocks. If you think it's useless, then that's your opinion, no need to derail the thread.


Rod
Money and money, not apples and oranges. I am just pointing out that Graham based investing has sucked for the past 5 years. Not derailing the thread, just educating people. If you had just invested the same amount in a simple index vs. making adjustments every week/month based on Rods suggestions, you would end up with better performance. Facts.
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[OP]
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ksgill wrote: Money and money, not apples and oranges. I am just pointing out that Graham based investing has sucked for the past 5 years. Not derailing the thread, just educating people. If you had just invested the same amount in a simple index vs. making adjustments every week/month based on Rods suggestions, you would end up with better performance. Facts.
That's your opinion. It's been working well for me. You are also cherry picking a period that the model has been partially invested. Again, with index, which is a different product for a different intention, you would be better off up to today. You don't know about a year or 3 from now. The choice is really between a basket of poorly diversified companies heavily in natural resources and financials versus a basket of companies sorted by different criteria and known principles of value investing by Graham.

There's a reason why XIC underperformed for years. And with the virus scare, XIC and their exposure to gold might do better. But the trading choice is on the idea being automated, not past performance. Value is performing by design, similar to how BRK has underperformed the US index. It's also not meant to compare. Investors buy BRK for a different reason than indexes buy SPY or equivalent.

A basket of companies can be constructed in multiple ways. If the goal is to outperform XIC, then this is not the model for it. There are other models for that. Even though this model will outperform at times, as it's done in the past - but that's not the goal.


Rod
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Investing strategy based on dividend growth

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Numbers back my "opinion". Btw, you don't know about 3 years from now even with the model so let's stop pretending. If you knew the future, you wouldn't be here arguing semantics with me.

The point was that one would do "decent" just by investing in an index and so far I see that being true especially with this underperforming model.

If the goal is not to outperform a dumb index, what else is it... To lose money over years by selecting a convoluted underperforming model just for the heck of it?
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@ksgill Not all portfolio's are designed to beat an index. As an example, MPT. If you don't want to learn more, NP. This thread isn't for you.

Edit:

Using a automobile as an analogy. Why do people not all drive the same type of vehicle? Why do some people not drive at all? Because, that doesn't suit everyone's needs perhaps?

Some Indexers are like the Borg from Star Trek. "You will be assimilated." Don't be like the Borg.

If you don't know who or what the Borg are: https://en.m.wikipedia.org/wiki/Borg
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ksgill wrote: Numbers back my "opinion".
What about the numbers on other periods, like 2015 to 2018?

There will be underperformance, I never claimed it wouldn't. 1 year of underperformance and now the model and the whole idea about value investing following Graham principle is broken? That's your reaction?

Is your issue with this particular model as a principle to trade? Or is your issue with the value approach to trade?

ksgil wrote: Btw, you don't know about 3 years from now even with the model so let's stop pretending. If you knew the future, you wouldn't be here arguing semantics with me.
I am fairly confident that this and all other models will do well 3 years from now because it's common sense to take quality and valuation as an approach to obtain positive results. If I wasn't, then I wouldn't be invested on it. What I am not confident is to say the same on a basket that doesn't take that into account and is heavily dependent on commodity prices to do well.

However, since the future is unknown, I rather trade and invest using a common sense approach that has been proved to work for decades than just to buy the whole market (also because with the whole market I don't know what I'm getting, I rather cherry pick the ones that matches my set of criteria).

If you don't believe in that quantitative investing is a viable approach to trading or investing, then let's agree to disagree, I don't have to convince you.
ksgil wrote: The point was that one would do "decent" just by investing in an index and so far I see that being true especially with this underperforming model.
Up to today or any other period where gold and oil make new highs. But this is not meant to invest, why you keep comparing 2 different strategies?

Comparing active trading or investing with an index benchmark is wrong because you aren't considering risk-adjusted returns. We are attempting to manage drawdowns whereas an index fund doesn't. Apples and oranges to the methodology how to make money.
ksgil wrote: If the goal is not to outperform a dumb index, what else is it... To lose money over years by selecting a convoluted underperforming model just for the heck of it?
By lose money you mean making less money than an index during the period it's overvalued?

The point is to trade with a set of rules to ensure consistency and discipline. No emotions. No gut feeling on predicting tomorrow. But while the future is unknown, we can use a set of ideas to trade on, which is rationally driven. Lots of people use the current buy signal to research a given company, as a screener for value investing. And the sell signal indicate when that should be sold for other companies or cash.

The model is very clear, why do you feel it's convoluted?

Trading requires a proper mindset. There will be periods of underperformance by design. It doesn't mean it's broken. Trading in the Zone by Mark Douglas is a great book to learn about the mindset required to trade.

I also don't keep boasting every time the model outperforms, so keep the discussion on the methodology and principles used. If you are not prepared for volatility you shouldn't be using it. If you keep comparing to the index, you should be aware that they are 2 products constructed differently, with different principles, so they will perform differently. One is not better or worse than the other. Just different, for different purposes.

This model is to obtain performance via value approach. It might or might not maximize total return. You want to beat the index? You need to maximize total return, using more momentum and less value. Not everyone agrees to dismiss value, and you need that often to outperform. There are models for that on the website. And to invest, I have also disclosed my growth portfolio, which has outperformed the index for 6 years since I stated it.

The index is the market. There are many ways to cherry pick from the supermarket of stocks. This model in this thread focus on a value approach.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
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MrMom wrote: @ksgill Not all portfolio's are designed to beat an index. As an example, MPT. If you don't want to learn more, NP. This thread isn't for you.

Edit:

Using a automobile as an analogy. Why do people not all drive the same type of vehicle? Why do some people not drive at all? Because, that doesn't suit everyone's needs perhaps?

Some Indexers are like the Borg from Star Trek. "You will be assimilated." Don't be like the Borg.

If you don't know who or what the Borg are: https://en.m.wikipedia.org/wiki/Borg
Forget the index for a minute, investing strategies want to maximize returns, correct? If a strategy does not maximize return, what's the point of it? To use your analogy, it's like intentionally driving a Kia that costs more in the long term than drive a Honda that costs the same/less. If those were the choices, I'd pick a Honda.
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rodbarc wrote: Comparing active trading or investing with an index benchmark is wrong because you aren't considering risk-adjusted returns. We are attempting to manage drawdowns whereas an index fund doesn't. Apples and oranges to the methodology how to make money.

By lose money you mean making less money than an index during the period it's overvalued?

Rod
Risk adjusted returns, really? Your model of 10 stocks is less risky than a basket of stocks? Risk adjusted returns is precisely why the model sucks.

It's not 1 year of underperformance, I've been seeing this specific model underperform year over year. Here is a chart from your own site:

Image

3 years out of 5 and probably 6th year at this rate. Are you telling me that the index was overvalued in 2016, 2018 and 2019? Perhaps you should add checks/balances for when you think the index is overvalued and just invest in a GIC. It should help your returns going forward.

Here is the drawdown that you are "trying" to manage, clearly failed at that as well.

Image
Last edited by ksgill on Feb 27th, 2020 4:17 pm, edited 5 times in total.
Illegitimi non carborundum
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ksgill wrote: Forget the index for a minute, investing strategies want to maximize returns, correct? If a strategy does not maximize return, what's the point of it? To use your analogy, it's like intentionally driving a Kia that costs more in the long term than drive a Honda that costs the same/less. If those were the choices, I'd pick a Honda.
No. Rod tried. You can't be bothered to read nor do any research when provided with the information. It's clearly too complicated for you. Move on.
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MrMom wrote: No. Rod tried. You can't be bothered to read nor do any research when provided with the information. It's clearly too complicated for you. Move on.
Ok, I also tried. It's clearly too complicated for you to see the pattern. Talk to you guys in another 3-5 years and see what happens.
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