I’m interested in both your strategies (dividends and momentum) as well. I’m still primarily invested in index funds, with a few small individual positions—mainly due to time constraints, which limit my ability to conduct proper analysis and due diligence.
From my perspective, I think I would benefit more from your experience and insights if your regular updates (monthly or otherwise) included commentary on the main changes compared to the previous update and the reasoning behind them—particularly when entering new positions. For example, why were you monitoring those specific stocks? What tools and filter criteria do you use? What kind of triggers prompt you to take action—do you set alerts in your broker platform for each stock on your radar, or do you use Google Sheets only ? If the latter, how often do you check your list ?
I understand that adding this level of detail might be quite time-consuming, though…
I did include all the rules for my dividend strategy. I did not for my momentum strategy, but then momentum strategies are probably all quiet similar. However, it works that well that I may have an edge somewhere and that is why I kept the detailed rules for myself. But then it is just 5.5 years and that is definitely too little.
I am almost sure that my rules are optimized for my personal situation. But I have some original rules for money management and probably for stock picking too. Original because I probably have read a few hundred books about investing, trading and strategies and I know a dozen professionals; nobody does what I do.
This thread is about mechanical investment strategies and I am happy to answer all questions you may have about that. I’ll try to keep up with the monthly updates as it seems that there is some interest.
First of all: an index fund is not an average and not that passive as most may think. I learned that there are currently more index funds that single stocks, so it is probably easier to pick single stocks.
But the opposite, active stock picking, is even worse. While the committee that selects positions for an index may be biased… you are more so.
I think the most important part is to decide if you want to do mechanical investments at all. The golden way between index investing and proprietary stock picking. Because whatever superior rules you find or any idiot like me may give you… it only works if you adhere to it.
My mechanics sometimes lead me to illiquid stocks and of course I would like to buy them first. I hope you understand that…
It is even worse: the amount I buy and when I double down, do partial or complete sells and so on are quiet original. And yes, sometimes I pick illiquid stocks and of course I want to buy the first. I am very close to reach my position limits and it gets harder to buy and sell.
Momentum factors are part of a lot of investment strategies, some public and some not. Mine is not. That may change in the future, but at the moment I prefer to keep the detailed rules for myself.
I even think that mechanical investment works best if everybody has his own rules; the lack of behavior risk is more than enough to give you an edge. Now, if everybody does the same it will stop working in my opinion.
Yep, there may be potential for improvement and I am quiet confident that I am an idiot and getting dumber and dumber with age. Therefor I am OK with my decisions from years or decades ago.
Well, maybe because there is strong evidence of underperformance of stock picking and whatever mechanical strategy for frequent selling/buying versus holding the whole market via index fund(s)?
Moreover, the vast majority appreciate the simplicity and the low cost of a couple of “buy & hold” index funds VS what you are doing.
The benefit that I see with your approach is that it makes you happy and keeps you invested. I cannot say that will work for me and - dare to say - most of the people here.
Having said that, it seems that there are some that want to know more about your strategy. So keep it up…
I think the fixed strategy works when it is very simple e.g. “I put 20% of my paycheck each month into Pillar 2 until I retire at which point I withdraw an annuity. Based on my salary projection and fund performance, I will retire at [age] with an annual income of $X”
This is correct, but it reveals what you (and probably – as you IMO guess correctly – most others discussing investing on this forum) want to achieve first and foremost: (total return) performance! (over long periods of time)
Nothing wrong with that. Especially during the accumulation phase.
And “double especially” if you don’t have time to look at any alternatives (let alone implement them!).
Other goals one might have – I alluded to this in my previous post, e.g. once you change from accumulating to withdrawing – could be:
steady and regular income streams mostly independent of market volatility
preservation of the nest egg for whoever you want to preserve it for
secondary, but perhaps surprising to some: paying even lower fees than you pay for owning VTI or VOO $
Performance might still be a goal, but not outperformance of VTI or VOO. Underperforming the MSCI AWCI or S&P 500 might be acceptable to some if the goals above can be met.$$
[$] Seems counter-intuitive -- as many have already internalized the mantra of "low cost index investing" since they have heard it so many times (insert echo chamber meme here) -- but my stock picked portfolio (note that I call myself a passive stock picker) costs me as follows:
Fees are 0.0033% [sic!] in the account I trade in (at IBKR). That's 9 x less than I would pay for owning VTI or VOO.
The 3.3‰ fees even include option trades which technically shouldn't be counted for a long only portfolio, but we're talking about an additional ~0.3‰, so I don't care much — I guess I'm paying 10 x less than for owning VTI/VOO if I leave out my option trading, which generates additional cash.
Fees are 0.0065% in the account where I no longer trade (but just receive dividends via corporate actions which are free of charge; the cost is essentially the Swissquote custody fee)
[$$] For the past six years I have outperformed the MSCI AWCI easily, and I am on par with the S&P 500, albeit with a β of currently 0.83, so consequently also generating some α along the way (for those who believe in the modern portfolio theory).
Nah, 26.73% XIRR I have per today in the momentum strategy convert 100k to ~316k in a bit less than 5.5 years. To maximize performance you have to maximize risk, as the performance alone does not say much. You have to maximize only the risk that brings performance. Behavioral risk does not add to performance, so you should avoid it.
Index investing does not avoid behavioral risk, you still can panic and the committee that chooses the index composition is probably biased too.
You can further limit risk by using a mechanical system with your index investing. Or, as I do, use mechanical systems that have exact goals, in my example one strategy to minimize volatility and maximize cash flow and one to maximize performance.
Diversification is a good tool to limit risk. I diversify strategies too.
BTW: the numbers for my momentum strategy look almost too good to be true. The problem: the strategy uses sometimes low liquidity investments and therefor does not scale…
I would argue that most of passive index investors do not seek (over)performance - more returns than the index they are tracking.
The stock pickers - daily traders - aim that. Ironically most of the times they would perform better if they just held a world etf.
Agreed. My point is that it is easier to do that with a couple of index funds and by adding less volatile assets like bonds, fixed term deposits or even 2nd pillar buy back ++.
Also - though I found it interesting - I wouldn’t invest much time trying to lower a 0.06% fee.
Behavioral risk is indeed a big thing and you should try to minimize it by educating yourself, check past crashes, have a long term goal, avoid being greedy etc. Mechanical rules also play a huge role, even if you are a passive index investor.
Again, as PhilMongoose mentioned, it seems to me that that the simplest the strategy/rules the higher the chance you will stick with it and not continuously questioning it.
Unless we make selling very complex on purpose. That’s actually a good idea
If you have to sell 1000 stocks one by one, you maybe tired after the first 100.
Or tell your partner to hide your broker credentials or mail them (encrypted) to your parents
How did you start out with selecting your initial bunch of companies? An existing index and then pick just those that match your criteria? Or just your own initial set of companies that match your criteria? And what is the universe for companies that make it into your mechanical strategy?
Edit: I noticed you already gave some answers further up, e.g. your universe:
My other questions might be too close to revealing your secret sauce, so feel free to ignore them.
Sorry to interrupt, but this caught my eye. On Swissquote’s website they state that custody fee is maximum 50.- per quarter, and that “for assets above CHF 1 million, a fee of 0.0075% per quarter will be added to cover external safekeeping fees.”
OK, from the beginning. I did invest in bonds and stocks since the early 80s. I had a lot of luck and that came from orange trees in Spain, but that is another story. I sold all my papers to buy land and orange trees but it was under water in October 87, so I just bought back the stocks… for around half price. The orange trees were under salty water. Friend of mine, a doctor from Valencia, lost all he had with orange fruit prices dropping later.
Swissquote made a lot of money by offering expensive services that are cheaper than the other more expensive services in Switzerland, People are stupid, just leave Schwitzerländli. Why the hell you should pay for that guy in a suit drinking beer in a bar where it costs about a hundred times what you pay in another country and then charges you 200 times what others do?
I started my main investments, my dividend portfolio, by selecting 25 stocks that fulfill my criteria. I have a limit of 20% per sector, so up from the 6th company in the same sector I just left them out. I did that with my 2nd and 3rd pillar money and live (or lived) off those investments since 2014. This year my momentum portfolio overtook the dividend portfolio so up since 2025 I live off that investments.
The momentum strategy is a bit complicate. I did around 50 years of backtests and then 11 years of forward tests. I buy absolutely everything there but have strict rules to exclude stocks. Probably I had a bad first year because most of the gains reach me in the second year. There is absolutely no proof that best returns come in the second year, but I sell most of my holdings after 6 months there. My rules tell me what to sell and what to buy, so I just do it.
Now, I congratulate all bitcoin and other krypto investors. While money banks around the world are influenced by Turkey values probably picking up stones in the river is a good idea. For me it is not…
Unfortunately this does not work. There are more than a hundred biases that make you behave very bad in the stock market. Most of them are that bad that you can know them in a very detailed level but you still fall for them. Otherwise psychiatrists would be the richest guys in the universe (OK, they are probably rich, but only because there are that many idiots around that can be charged by the hour…)
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