What is rule-based Investing?
In rules-based-investing we define a clear set of rules. These rules comprise a strategy. Here is an example strategy:
“At the first day of the month, look at the performance of bonds versus stocks by calulating the 3-month performances of two exchange traded funds, SPY (the SPDR S&P 500 ETF) and TLT (the iShares 20+ Year Treasury Bond ETF). If SPY outperforms, then re-balance the portfolio to 60% SPY, 40% TLT. If not, rebalance to 40% SPY, 60% TLT.”
It eliminates our main weakness, emotion.
Developed through years of evolution, our basic human instincts are necessary for our survival. Keeping with the laws of the jungle, these instincts push us to run when in danger and charge when we see opportunity. The stock market, much like a casino, is built to take advantage of these instincts. Investors, if left to their primitive fear/greed instincts, tend to buy high and sell low.
Continue reading Intro to rules based Investing – Why follow an investment strategy?
Easily create and backtest a rules-based Investment strategy
QUANTtrader is a swiss-made software tool used to develop, backtest and implement rules-based investment strategies. It was initially developed by Frank Grossmann for his own personal use. After having sold two companies, Frank trades for a living and his software reflects this. QuantTrader is available from Logical-Invest.com for a monthly license.
Since it is built by a trader and long-time investor rather than by a developer. QuantTrader’s main strength is in building medium to long term investment portfolios that are diverse, adaptive and can control risk. All this without writing a single line of code.
Continue reading QUANTtrader -The Logical-Invest tool for building and backtesting Investment Strategies
In this post we will:
- Take a look at a simple, momentum based, monthly rebalanced Equity/Bond portfolio.
- Search for what has been the optimal dates in the month to rebalance such a portfolio.
Each month we allocate to two ETFs: SPY and TLT.
If SPY has outperformed TLT we rebalance to 60% SPY – 40% TLT.
If TLT has outperformed SPY we rebalance to 20% SPY – 80% TLT.
For the first run we will re-balance on the first of the month and close at the last day of the month.
Now will try different combinations of entry and exit days.
Continue reading Day of month effect on Bond Equity portfolio
The blog has finally its own home at sanzprophet.com and a new look. I admit I miss the older ‘notebook’ look but this new template should be easier to read.