How to select stocks for a strategy

R

rvsw

I have a generic question which I'm sure has been answered in some form on this forum or in perhaps books on the topic. However, I have not been able to find that so posting it here.

If you have got a strategy that is bringing in positive returns from a 20 stock portfolio over the last 10 years, is it okay to of 20 stocks to of the best performing stocks in the strategy in the past 10 years? Will that not be considered as customising the strategy to the historical data?

The reason I need to trim the list of stocks is because for the 20 stocks, I am barely able to meet the buy and hold standard but with the list of 10 best performing stocks, it provides significant improvements over the buy and hold. I selected these 20 stocks at a random from different sectors to reduce the correlation

Thank you for any inputs
 
rvsw said:
is it okay to of 20 stocks to of the best performing stocks in the strategy in the past 10 years?
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what are you trying to say here?
rvsw said:
I selected these 20 stocks at a random from different sectors to reduce the correlation
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correlations drastically increase during market turbulence. With all the ETF's available to small time investors, it is so easy to diversify by asset AND strategy.
I would (and what do i really know) reduce the 20 stocks to 20 or 10 different ETFs. Sectors/strategies trend much better and more frequently than individual stocks. For example, instead of buying Aroura Cannabis and having to live with the wild swings due to acquisitions, you could have reduced your variance by a significant amount holding the marijuanna ETF HMMJ.TO.

Never in history has a retail investor had access to the global economy like he has today. Don't waste this opportunity to chase the 1950 NYSE stock picking.
 
rvsw said:
I have a generic question which I'm sure has been answered in some form on this forum or in perhaps books on the topic. However, I have not been able to find that so posting it here.

If you have got a strategy that is bringing in positive returns from a 20 stock portfolio over the last 10 years, is it okay to of 20 stocks to of the best performing stocks in the strategy in the past 10 years? Will that not be considered as customising the strategy to the historical data?

The reason I need to trim the list of stocks is because for the 20 stocks, I am barely able to meet the buy and hold standard but with the list of 10 best performing stocks, it provides significant improvements over the buy and hold. I selected these 20 stocks at a random from different sectors to reduce the correlation

Thank you for any inputs
More...
Winners in the past will not necessarily be winners in the future. Be careful which ones you select.
 
tomorton said:
The last 10 years has been great for the stock market. Is there a technical or fundamental basis for gauging performance over then next 10?
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I was thinking about this, this past Spring/Summer, and ended up going all sorts of "olde school" and reviewing trend-following techniques, and found a lot of free money waiting. That was my response to "Hey, what about the next 10 years?" and I guess my response was, "Well, do trend-following techniques work?" and Yes was my answer. That's the technical end.

The fundamental end? I ended up back on http://www.multpl.com and, even if you allow for structural changes in the market to push the p/e around (and specifically, *up*...), you still have to conclude we're high right now, and should be sitting at 2350 or so -- >20% drop. So at that point, you have to look at earnings to keep us here (S&P 2950), and as of this moment, we're very tight on whether we climb or not. We need the worries (like Canada/NAFTA!) to go away, to pop us up any higher before we get into this Qs earnings. But!!

If the numbers look good, they will support 2950 (and lower the p/e). If not?? The next 10 years will be a song of cap.ex, school debt, health finance, SSI, fewer workers and higher wages. Uppity, downditty.

:cool: Thems m'thoughts.
 
rvsw said:
I have a generic question which I'm sure has been answered in some form on this forum or in perhaps books on the topic. However, I have not been able to find that so posting it here.

If you have got a strategy that is bringing in positive returns from a 20 stock portfolio over the last 10 years, is it okay to of 20 stocks to of the best performing stocks in the strategy in the past 10 years? Will that not be considered as customising the strategy to the historical data?

The reason I need to trim the list of stocks is because for the 20 stocks, I am barely able to meet the buy and hold standard but with the list of 10 best performing stocks, it provides significant improvements over the buy and hold. I selected these 20 stocks at a random from different sectors to reduce the correlation

Thank you for any inputs
More...

Like yourself, not a pro , not a day trader? and not a trader here. That said then why would
you forfeit possibly the only powerful force we can grab a hold of?
The drift, the bias....you can subtract it from individual stocks and quantify it.
Same with etfs as a poster already said.
I dont have to create a hedge or a degree of neutrality that for me ends up as a useless drag on
return. I can modify percent allocated to risk vs cash thatnampro may not be able to do.
(Apologies to those who seek leverage). Fear/caution is a protective drag on return as well but
...oh well.
I look for entries in " continuation of the good " ...fill in any stock name that suits a strategy.
Reversals to trend in a much lower timeframe than trend is my definition of good.
Reversals on a higher time frame are bad picks to me.
No one knows the future has to be accepted.
Well , my opnion is to select stocks that fit your strategy. You have the option to sit out when you should. None of this is easy for me. Just saying here.
 
If you trim the 20 stock portfolio to those that performed best over the last 10 years you assume that returns in the next 10 years will be identically distributed. This may or may not be a good assumption. According to some people in momentum sphere it may be a good choice to keep the 5 or 10 best performers and sell the bottom 5 or 10. But in case of a market downturn the top 5 or 20 may get hit harder. You are on you own here because no one knows the composition of your portfolio and you are asking a very general question that actually has no answer while providing no details.
 
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