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Friday, August 12, 2016
Here goes nothing....
This is a test!
No real money is traded, but I keep a virtual trading account with (near) real records.
I developed Dart Strategy Portfolio method last year and published it here(link) on December 28, 2015. I myself didn't believe it could work, but it did and in more ways than one.
Test account was started on Jan 5, 2016 and immediately hit a draw-down, which wasn't unexpected for me at all. This is not a first time I was starting a multi-position dynamic system. Some very important lessons from management of System12 in simulated, then virtual and then real environment (2013-2014) came really handy this time around. I published opening allocation and first few trades here(link).
35K was invested into 10 equal size positions with little less than 10% cash leftover for replenishment. Dart method is designed to function "regardless of personal opinion and market timing", but as luck would have it, was started right into teeth of 10% January-February drop. Portfolio chewed thru 3/4 of cash reserve, until it fully recovered by beginning of March. Today it sits at over 39,000 or about double of S&P500 ytd gains. (Elephant, I'm telling you ;-)
Even more bizarre is how it got there. I didn't even try to pick which stocks to buy (it really was random), didn't worry about diversification or dividend yield. I will be first to admit that had I randomly picked some other random tickers - my results would be randomly different. No kidding. But I learned some very important things about Best List - scan for best stocks this market has to offer.
Most of Best List stocks don't react much to earnings. Really, these are solid money making enterprises and people don't expect surprises during dreaded earnings season. Size of the List doesn't change very much. It has 41 stocks in it now, many of them since last year. Inordinate amount of stocks that disappear from the List are gone because company was bought out for huge premiums. So many that I even had some randomly traded into test account, but that is beside the point.
I think other people also see these companies as prosperous and sensibly priced .
THESE people don't buy stocks, THEY buy the whole kit and caboodle.
Original strategy proposed a trade every week, which in fact happened for risk management in a beginning of the year. (Believe me, nothing gives me more pleasure than to sell a loser.) Later I encounter several periods when no trades were necessary. Everything was ripping tits higher. Why mess with perfection? Let the winners run... As a result, costs of running this method (commissions) were lower than estimated and some gains bigger than they would be otherwise.
It is possible to further dial in settings for the scan, so to deliver more focused and smaller list, that can be managed with reasonable amount of money. I started another test account to see what I can do with $20,000, if I pick 6 non-random stocks for portfolio based on Dart Strategy principles. I would do it with real money, had the market not be so high and time of the year not so treacherous. It would be instructive for future subscribers to observe what happens now, as system start is always very unpredictable. Always.
Get your guns loaded! Dart v2 will be published next Friday!