Performance Attribution

 My portfolio comprises stocks and funds from various gurus and teachers. Here is the description of each one. I shan't name them for fear of being accused of promoting one over the other. 

Guru 1:

15 years of track record. Averaged 25% per year return. Highly transparent and informed me of every trade. 

Result: from 23 Mar 21 to now. 

4.8% return. 

Guru 2:

10 years of track record with 30% return per year. Gives me a black box type of system based solely on momentum. Scans through the NASDAQ for the top five momentum stocks. 

Result: -15.04%. 

Guru 3:

Internet sensation with almost 1 million followers. Personal friend. Made 3x in 2020 due to investments in speculative tech companies like SEA Ltd, Tesla, ARK Genomic Revolution, Lemonade, Square. 

Result: - 13.2%

Guru 4:

12 years of track record of around 7.7% return per year. Purely fundamental analysis. 

Result: -28.2%. 

My own:

5 years of track record of around 18% per year. Value - momentum strategy. 

6.8%

It appears that my picks are second to guru 1. But the measurement period is not long enough to be statistically significant. 

Next, I divide the returns into certain styles. Momentum strategy based on weekly momentum charts. Mean reversion strategy based on buy 1/4 at 50 MA, 1/4 at 200 MA. 1/4 below 200 MA. Fundamentals without considering technicals and "black box". 

1. Black box, associated with guru 2. -15.04%

2. Mean reversion. 1.9%

3. Momentum. 7.4%

4. Fundamentals without technicals. -28.2%

I realised that momentum strategies provide the best return but again the measurement period is narrow. 

Next, I chose the two best gurus and dissect the returns based on styles. Guru 1 and Ahem, I. 

Guru 1's mean reversion averaged -0.3%. Not impressive. Buying on dips at MAs prove to be negative. It's like catching a falling knife, hoping there will the support lines will hold. 

Guru 1's momentum. 13.8%. Very good returns. It means guru 1's stock picking strategy, overlaid with momentum worked the best. 

Jeff's momentum produced 6.57%. Not exactly the best but still satisfactory. Many of the momentum stocks and funds started out a year ago and have now broken down to become mean reversions. Meaning that I bought Tesla 1 year ago and is up 150%, but it has since fallen 35%, triggering a negative momentum signal 3 months ago, which caused me to sell 3/4. 

I didn't have any stocks or funds using mean reversion so everything came from there. 

I realised that momentum strategies when overlaid with good stocks, ETF and fund picks, produces the best upside, least downside. It allows me to temporarily leverage because the downside risks are low and the upside is about 3x more than downside. I do have a core portfolio that I never sell, and use mean reverting strategies. They are reserved for Amazon, Facebook, MMM, i.e. profitable stocks with strong fundamental values. For emerging tech, like SEA Ltd, Tesla, I will only use momentum strategies. I will cut them as soon as momentum turns negative. It doesn't matter if I miss the bottom or sell below the top, at least I capture a 60 - 80% of the trend. 

Comments

  1. Ced14 May 2021 at 09:18

    Any views on Baba current depress price?

    ReplyDelete

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