retail investors should seek out financial planners for asset alloation decisions. index funds for equity is the way to go.
I’m thinking about switching my index funds to these “formula trading” type concepts. Anybody thinking about that? I’ve experimented before and had great success. I’m trying to figure out, “why not?”
KJH, do you mean quantitative scoring techniques?
No, though the screener I’m using from AAII has some of that in it and some of the screen elements I’m tinkering with have a ranking component but I don’t have it generate a score per se. As far as replacing buy’n’hold index funds (what this thread was talking about), i’m contributing a little money to FormulaTrading.com. I’m “evaluating” their service so they don’t charge me the 1%, even tho’ it appears to be a bargain at 1%. Their marketing schpiel just makes sense to me. Time will tell if it works. A lot of blogs are following magic formula investing and I’m impressed with the returns. I’m impressed with Validea’s work even tho’ it’s a little wacky. For my own formula trading I’m using screens from AAII. I put together a portfolio and then “neutralize” it by carefully shorting index components. I do some fundamental analysis of the candidates… usually I get them down to 25 from what the screens turn up (80+ sometimes). I did this at the beginning of 2008, then stopped because I couldn’t devote the time needed. I did ok at that time but this time I’m trying to get my processes down (like using automation) and also tinkering with methods to lower trading costs and lower volatility. I"m liking what I"m seeing. I hope I’m not kidding myself.
Interesting, I didn’t even know Greenblatt had this site. Keep us updated on your results.