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Getting Started With Quant Investing

Hi and welcome to Quant Investing!

 

This page gives you an overview of how to make the best use of our services.

 

Find your investment strategy

If you do not have an investment strategy already the first thing you have to do is to find the right investment strategy for you.

Your best investment strategy is NOT the one with:

  • the highest return,
  • the lowest Sharpe ratio
  • the lowest maximum draw-down
  • the strategy currently beating the market
  • the strategy that worked best in the last bear market

The best strategy is the one you understand, feel comfortable with and lets you sleep comfortably at night. It’s the strategy that fits your nature and is the one you can stick with in good times and bad.

You can read more about how to find your investment strategy here: How to find your best investment strategy – not the one you expect

Here you can see a list of all the best strategies we have tested: Quant investing – best investment strategies

 

A strategy we recommend you take a look at

A strategy we suggest you take a look at is Qi Value as it uses all the best valuation ratios we have tested.

You can read more about the strategy and back-test here: This outperforms all other valuation ratios (14 year back test result) 

Updated here: This investment strategy is working even better than we expected +711% 

 

You can also back test your investment strategy

Once you have decided on the right investment strategy you can use the screener to back test your investment strategy to make sure it works.

 

How to implement your investment strategy

The next step is to plan how you are going to implement your investment strategy.

Your plan should answer the following questions:

  • How are you going to screen for ideas?
  • How much company research are you going to do?
  • When are you going to sell?
  • How are you going to limit losses?

Here is an example to help you. It is a detailed description of how we implement the strategy we use in the Quant Investing newsletter.

This is how we select ideas for the Quant Value newsletter

Once you have decided on your investment strategy you can use the Quant Investing screener to implement it in your portfolio.

 

How to improve your returns

We have found a few ratios and indicators you can use to increase your returns. Our tests have shown that they can improve the returns of nearly all strategies. They are all definitely worth looking at.

 

The Piotroski F-Score

The first indicator is the Piotroski F-Score.

You can read all about the Piotroski F-Score in the following articles:

This academic can help you make better investment decisions – Piotroski F-Score

Can the Piotroski F-Score also improve your investment strategy? 

Piotroski F-Score back test

You can also use the Piotroski F-Score to identify and sell companies with deteriorating financial results in portfolio. To find out how take a look at this article:

Ever thought of using a fundamental stop-loss?

 

Momentum

If there is one thing I learned from the 168 different investment strategies we tested in the research paper Quantitative Value Investing in Europe: What Works for Achieving Alpha is that share price momentum can increase your returns.

You can learn more about momentum here:

10 myths about momentum investing, squashed 

How to find stocks on the move with a better momentum indicator - exponential regression

 

Other things you may want to think about

Country or regional concentration

These are limits you put in place to stop you from a too large part fo your portfolio in any one country or any region worldwide.

For example, that you will not invest more than 15% of your portfolio in any one country outside your home country or that you will not invest more than 30% of your portfolio in Asia.

 

Industry sector concentration

The same as country concentration you may want to also limit the part of your portfolio that you invest in any one industry sector.

This is important as a lot of companies in one industry sector may appear in your screens at the same time.

For example, that you will not invest more than 15% of your portfolio in any one sector.

 

Currency Risk

How will you manage currency risk in your portfolio? You can set a limit of how much you want to invest in any one currency other than your home currency or you can hedge currency risk or both.

Here is an article that can help you decide how you would like to manage currency risk:

To hedge or not to hedge - currency risk in your stock portfolio

 

How to keep losses low

We also recommend that you use a strategy to minimise your losses.

If you use momentum in your investment strategy we recommend that you use a trailing stop loss of which you can read more here.

If you look for undervalued companies you can use a trailing stop loss or a fundamental stop loss.

You can find more information on both here.

 

Wishing you profitable investing

 

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PS You can find more information about the screener here: About the screener

PPS More information about the newsletter is available here: About the Quant Value Newsletter

PPS It is so easy to put things off why not sign up right now?