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Online Share Trading

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Strategy

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WES
Super Contributor
Let say, you take all the shares in the alsi, you throw out the obvouis dogs, for example platinum, gold, construction, and buy the rest, concentrating on the shares with the biggest market cap, you will defenitely beat the alsi and most of the asset managers and the unit trusts, not so ?
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11 REPLIES 11
manere_fortis
Frequent Contributor
Ah, those have been the dogs, but there may be a changing of the guard at the kennels?
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SimonPB
Valued Contributor
WES, in short what you're doing is buying the winner AKA momentum portfolio .. yes it works about 3 out of 4 years which is more than enough winning years ..
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Pluto
Contributor
You can make it win every year if your selection into the portfolio uses discretion about admitting shares that have run hard for say the last 2 to 3 years. Develop a system that evaluates the strength of the trend coupled with the maturity of the trend (ie how long can it go on) and you can win every year.
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SimonPB
Valued Contributor
every year ??
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surfer
Regular Contributor
So why are all asset managers not using this strategy and all out performing the market every year?
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ReneK
Contributor
.........Because they are out playing golf for one the other is it is not their money.
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Pluto
Contributor
Yes every year. The investing system I use creates a normalised ranking of trend strength for the JSE once a week. This makes the individual share selection for a portfolio relatively simple becasue you can compare apples with apples. In the bear market in late 2007/8 - shares like SHP, GLD, REM were out performers - during times like this one would hold mostly cash as the number of long opportunities was scarce.
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WES
Super Contributor
I think, the asset managers focuses on management fees and try to out think the market, you can't out think the market all the time, nobody can do that all the time, you get lucky for a while, but that is gambling not investing, in addition next time you meet an insurance broker selling ra's, ask him /her whenever have their underlying assets beat the alsi ?
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Oom_Boom
Frequent Contributor
WES, another option that one can look at is the SatrixRafi fund. The Top 40 is overweight with resource companies, so the RAFI fund has those that scew the weighting cut out, which turns out to be most of the resources. SO in effect they do what you suggest, albeit with some formulations and rules.
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SimonPB
Valued Contributor
RAFi uses some fundamentals to weight .. SWIX reduces off shore and cross holdings ..
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Not applicable
well, try this for a back test. Buy any stock that is on a pullback (for programming purposes Stochastics will work) but trading within 10% of its yearly high. Set a 10% stop and say a 30% target. Back test this - I get a 55% success rate on a basket of 130 stocks with CFD's available (I use this as a measure of liquidity) dating back to 2000. Now try the same exercise on stocks trading between 10% & 20% of their yearly highs - same story, but slightly less successful. Now try stocks trading below the 20% line - the stats get significantly worse. The point is not to demonstrate a system, but to show that momentum is the most powerful trading indicator out there.
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