Strategy

Target:

  1. Target avg annual return: 20% (1,5% mth)
  2. Target max risk score: 4 / 10 (Etoro Risk)
  3. Target max drawdown: 30% (Yearly)

Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it

Albert Einstein

Strategy Outlines

portline strategy is as follows

  1. All-Weather Inspired Portfolio
  2. Systematic Trading, 30% Algorithmic Trading
  3. Dollar Averaging, Weekly
  4. Rebalance, Quarterly

All-Weather Inspiration

Today it is very easy and common to buy a share into the largest companies, buying some of the common ETFs (SPY, VOO, IVO) or similar. These types of ETF are algorithms and they rebalance to fit into the 500 largest US companies according to some rules. They have very low cost compared to most trading companies, so it is today seen as a very easy and convenient way to generate good returns, while being a passive, still diversified (to some extend) trading strategy.

I have used this very easy and nice site to generate a graph visualizing annual return of SPY index since 1994 to 2019. I definately recommend to visit portfoliovisualizer and play around with the different template portfolios for comparison. Also to test different concepts. It is a very easy to use interface, and a very fast method of simple backtesting.

Trading in SPY has given an annual average return of ~10% per year, but it came with a max drawdown of 50% !. That is why I choose to use a steady 10% instead. Because, I really try not to be too correlated to the market (if that is even possible) and would like to compare my strategy to a steady 10% instead.

Testing the all-weather portfolio over last 13 years, gives an annual return of ~7,5% a year, but instead of having a drawdown of 50%, it is just 12,20%. That is why I set my target max drawdown on to below 15%.

Which actually gives it better performance than a 40% Stocks and 60% Bond Portfolio, rebalancing monthly, that has avg return of ~6,5% and max drawdown of 20%.

Finally comparing the portfolios for the last 13 years

All-Weather performs very well despite the fact it has a big portion of bonds. Now, wouldn’t it be a great strategy to have - if it was just a little more aggressive…