This article gives you an overview of how to get started Started With Quant Investing.
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)
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.
Once you have decided on your investment strategy you can use the Quant Investing stock 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:
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:
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:
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.
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 keep your losses low.
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.
If this all sounds like too much work for you
The 80/20 newsletter saves you time and increases your returns
To help investors that do not have the time to find and research companies we started a newsletter service.
The aim of the Quαnt Value investment newsletter is to apply the 80/20, or really the 90/10 principle to investing as it incorporates all our best research and ideas in summarised form.
It gives you 90% of investment returns while spending only 10% of the time you would normally have to.
The newsletter does this with a more than 15 year market beating track record.
Find out more about the newsletter by clicking on the following link: Quαnt Value investment newsletter
Wishing you profitable investing
PS You can find more information about the screener here: About the stock 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?