Model Portfolio vanmeerten:VMNHI

My strategy to investing is based on over 40 years of experience studying what works and doesn't work in various bull, bear and recovery markets. I firmly believe that with some knowledge and experience, the right tools and a lot of discipline the average investor can have superior portfolio performance that not only beats the stock market benchmarks but also most of the top money management professionals as well.

The biggest secret to investing is there are no secrets. No single economic or stock market predictor works all the time. Buy and hold has been proven not to work because the economy and investing environment is dynamic and constantly changing and your portfolio must be adapted to the conditions that are presently in place. Sole reliance on fundamental analysis alone is foolish especially in light of a recent study by Reuters that 85% of all companies' earnings reports came in above or below the consensus estimates of the financial analysts' projections.

For an investment professional to be of value he must preserve capital, have a positive rate of return for all periods and add value to the relationship by having his portfolio performance exceed the return of selected stock market indices. He must show he is worthy of the fees he charges.

A positive rate of return with capital preservation could be achieved using a combination of Federally insured CDs, short term Treasuries and Insured AAA bonds but in the end your net return after taxes and inflation are taken into consideration would give you a net decline in purchasing power.

The only long term way to have a net return in excess of taxes and inflation is to have an actively managed portfolio using a combination of stocks, equity and bond closed end and exchange traded funds, money market and inverse exchange traded funds. The weighting of which must be appropriate to the current market conditions. What was happening 6 months or a year ago is irrelevant.

Each day I start fresh with no watch list or favorite stocks and use the tools available on Barchart to screen approximately 12,000 actively traded securities and eliminate all pink sheet, penny stocks and illiquid securities from consideration. I then filter out all stocks that are having a negative price movement and are not hitting new highs in the majority of the recent trading sessions. Those securities are further filtered using a combination of 16 to 20 technical momentum indicators that I have find are reliable in the current market conditions. Many days no stock will pass that filtering, If none do then there will be no stocks added to the portfolio on that day. Most days only 5 to 10 of those 12,000 stocks in the original list will make the final cut. Those that do are then reviewed to see in there is an industry consensus that the company will continue to warrant increases in price due to projections that sales and earnings per share are expected to increase in future reporting periods. Any security that passes this filtering must pass a final review of how that securities' price is reacting in the last 3 trading sessions.

Securities in the portfolio are reviewed several times a day using the same 16 to 20 technical momentum indicators as well as comparing the stocks' price movement to the stock market benchmarks. Securities are eliminated if they have a negative price movement or fail to perform better than the stock market benchmarks.

My strategy is that the whole is equal to the sum of the parts and every security should be strictly analyzed using both technical and fundamental tools to assure that the security is worthy not only to be added to the portfolio but to continue to be held in it.

Active portfolio management using knowledge, experience and both fundamental and technical tools are ineffective unless used in combination of a strict, objective and unbiased discipline of portfolio management.

Again, the goal of this portfolio is to preserve capital, have a positive rate of return that exceeds the rate of return of the selected benchmarks for all periods of time. No taking chances. No swinging for the fences.

Posted by Marketocracy at 7:29 PM | Permalink