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2021, the Year of the Monkey. $SPX #markets #trendfollowing #trading #investing #funds #heikinashi #WealthManagement

January 3, 2022 Comments off

Each year, around this time, everybody has an opinion about where the markets will end next December. Very few are right, with the Lady Luck on their side. As everybody knows and as few admit, forecasting the markets is pure entertainment.

In his book A Random Walk Down Wall Street, Burton G. Malkiel describes a dart throwing stock selection method as “Taken to its logical extreme, it means that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”

Five years ago, I recreated this simple random stock selection to generate a series of funds and compare their performance with a benchmark, in this case S&P-500. At the of each year, I was running it, with similar results: the Monkey beat the Market and most of the fund managers.

Input

  • The S&P-500 stocks universe.
  • The stocks selection is 100% random.
  • 100 funds are generated.
  • Each fund has 30 stocks (an optimal value for risk diversification).
  • Buy (at close on the last day in December) and Hold (until the last day of the next December).

This is how one set of randomly generated 100 funds performed in 2021: 73 were better and 27 worse that the benchmark S&P-500. The lowest performance was +13.18% and the highest, +47.81%. (Note: one can generate any number of sets. The results show the same positive tendency as above).

How many professional fund managers beat the lowest performance of 13.18 in 2021?

And here is an animation of the process, with S&P-500 in yellow:

Why should we care?

  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to human fund managers?
  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to Artificial Intelligence/Machine Learning-driven funds?
  • Despite its simplicity and performance in good and bad times, no fund manager will sell funds based on dart throwing. They and their clients won’t accept the fact that a simple random stock selection performs better that most of the highly-paid human or automated fund managers.

Next step?

  • Let’s follow in 2022 a randomly generated fund. It’s fund #50 in 2021, with a performance of +31.26%.
  • Its components are TRMB GOOG CMI IEX FLT CVS UNH HWM ABMD VFC FE AAPL WELL WYNN WFC BMY LH QCOM CHTR NXPI WMB ABBV CVX HRL TRV VZ CMCSA K MMM SYY.
  • At the end of each month I will publish the buy-and-hold performance since the start of 2022. Better or worse that the benchmark? Time and the Monkey will tell the story.

Disclaimer: This is not a recommendation to buy or sell financial instruments of any nature. It is just a reenactment of a dart throwing stock selection method based on the book A Random Walk Down Wall Street by Burton G. Malkiel.

A long-term view for $SPX #heikinashi #markets #trendfollowing #trading #investing

January 2, 2022 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

SP-500  ($SPX) – quarterly

  • (+) Uptrend with a stop @3,848
  • (!) A slowdown (haDelta).

SP-500  ($SPX)yearly

  • (+) Uptrend with a stop @3,854
  • (+) haDelta is overextended.

$BTCUSD is still bullish #heikinashi #markets #trendfollowing #trading #investing #cryptos #Bitcoin

November 14, 2021 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

Bitcoin  ($BTCUSD) – daily

  • (+) Higher highs, higher lows.
  • (+) Stop is @58,126.
  • (!) We don’t know what haDelta will do. Patience until this is resolved.

Bitcoin  ($BTCUSD) weekly

  • (+) Positive.
  • (+) haDelta offers a bullish signal.

Bitcoin  ($BTCUSD)monthly

  • (+) haDelta triggered a buy signal several months ago.

$TSLA, again, a bullish play #heikinashi #markets #trendfollowing #trading #investing #technology #Tesla

October 31, 2021 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

Tesla  ($TSLA) – daily

  • (+) Ready to go higher (haDelta).
  • (+) Above the trailing-stop.

Tesla  ($TSLA) – weekly

  • (+) The power of a buy-stop.
  • (!) haDelta over historical highs.

Tesla  ($TSLA)monthly

  • (+) Bullish
  • (!) haDelta is still bellow its recent high.

$TSLA, waiting for higher grounds #heikinashi #markets #trendfollowing #trading #investing #technology #Tesla

October 11, 2021 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

Tesla  ($TSLA) – daily

  • (++) Perfect uptrend, higher highs and higher lows.
  • (+) Above the trailing-stop.
  • (!) haDelta points to a short pause.

Tesla  ($TSLA) – weekly

  • (+) The buy-stop becomes a trailing-stop above 803.
  • (!) Even here, haDelta points to a short pause.

Tesla  ($TSLA)monthly

  • (+) Bullish price formation. 851 a make it or break it point.
  • (!) Watch haDelta.

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