I reduced both GLD and TLT by half. Both ‘risk off’ positions now constitute 10% of my overall holdings. Because small cap outperformed all other market caps, my allocation this week was to the $1-5b market cap, spread out across all of the major industries. The goal here is to trend with the market, positioning in the very best growth stocks, but keeping protective hedges in place in the form of risk off assets when they do better than equities.
Get it?
If GLD or TLT are doing better than stocks for the week, I up my allocation by 5% per week and vice versa.
For the week, I trended with the SPY, up around 1.25%. That might not sound like much, but annualize that and you’ll begin to see why I am doing this.
Here were some of my winners.
GLD $122.18 to $125.66
RGLD $89.12 to $92.89
ODFL $95.86 to $99.64
IPGP $166.82 to $174.92
CGNX $103.08 to $108.61
ABMD $147.90 to $150.80
This week, I’m positioned in a much more aggressive market cap, but I have a few utes in there that might slow down the beta. I do, however, have 10% more allocated to equities, so that will play a factor too. All in all, I cannot be more content with my performance and do not miss the hazards of position swing trading, which had caused me endless grief and agony, long nights of sleepless cold sweats.
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So your quant strategy is to chase whatever worked the week before, nice.
All quants are designed using a theory. My theory, which has proven to be correct, is that 1 week is long enough to determine a trend and short enough to get on before it’s exhausted.
What I am doing is simply chasing alpha, but with my own risk averse twist. I welcome criticism and will debate you.
I would have put it a little more delicately, but you capture the essence of what’s happening with this plan. I think splitting the strategy into a longer term and shorter term trend following quant would be much more interesting.
I am afraid of drawdowns. If I extend the strategy, time wise, then I would, theoretically, hold companies that just missed earnings and revealed to be frauds. I could place stops, but I do believe the ultimate stop is reassessment.
“The goal here is to trend with the market,…”
“trend” or did you mean … “sashay”?
If you’re afraid of the drawdowns, you’re not taking the necessary risk with sufficient tracking error to beat the market. Nothing wrong with that if you’re running a hedge fund. If you’re looking for market beating returns, however, may I suggest three units of FAANG and two units of FFTY?
I am beating the SPY by almost 2x. I am not running a old man fund.
Use a shorter term quant strategy as the hedge against drawdowns or FOMO, use the longer term quant as the trend follower.
For example- long term trend is currently bull – so pile into SPY and FAANG. Then the only drawdown you have to worry about is the turn before the next recession.
Then your short term plan can utilize trend following for both longs and hedges against short term drawdowns.
Just trying to beat SPX isn’t really a great goal. Are you trying to beat Spy by a percent? Double? Beat Ackman? What’s the target return – that should be the goal and the. The strategy can be tailored to suit.
May I ask how much are you beating SPY by?
2x’s as he said above.
I’m beating spy by 7% overall. My trading accounts are beating spy by 89%. Exodus ftw