In its initial version, Aggressive was an equal-weighted portfolio derived from two different quantitative stock screens, based on companies that trade on U.S. exchanges. Each screen produced an exceptional trading plan by itself, but when the two were combined, the volatility of returns was reduced without much degradation of total returns. This was because their backtested, detrended equity curves have relatively low correlation. Through experimentation and backtest, I have found a simplified âone screenâ method that produces slightly improved results, and in my opinion, simpler is usually better. The new screen combines two momentum filters with a valuation sort order, holding the cheapest stocks that meet the momentum requirements. I have tested various holding counts and settled on the top ten for my model portfolio tracking. Counts of five through twenty were tested with robust results, the main response being a reduction in volatility as more stocks were held, but returns diminished slightly and transaction expense increased as well.
[To view the stock selections, see the Aggressive Portfolio results and allocations, and read some ideas for modifying the Aggressive plan, read more…]
I have placed my trade orders for May.
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