Adjust your positions to make your portfolio more optimal to your goal (max return/risk or reduce variance) managing a single position can be done with a stop or defined exit. Portfolio management & risk analysis is not about timing, it’s about understanding your portfolio at large. It’s another level of thinking.
OK. But to do that do I not have to make certain assumptions and the results the spreadsheet calculates are based on those assumptions. So if my assumptions are wrong the results will be off. Given what you know about my process, (right now I'm fully invested) what do I do differently when I close my next position? What would your process be? Unfortunately the spreadsheet doesn't like TSE Stocks. I put in a symbol (TSE:CIX) and it will give me a price but the rest of the spreadsheet calculations are populated with #NUM.
This is a hall of fame worthy thread that should have really been put under a proper start and title. Thanks for elucidating for us lost souls, @longandshort. The sheet is elegant.
I'm not sure how Google pulls in TSX data. It's correct that if your assumptions are wrong the model will be wrong. This is the nature of any model. If a goal of a good trader is to take defined risk, your error in defining risk is itself a risk. Based upon your process what I would do is: - use the sheet to test 3-5 companies in your short list -- how would they fit in with the rest of your portfolio? the biggest questions revolve around how new positions impact your portfolio volatility (standard deviation) and factor exposure - you only want to add things that will improve your factor exposure and/or reduce portfolio volatility - the expected return function is extremely basic, but use it as a benchmark for the return you make off the stock note: - time varying nature of factors is not analyzed in this model -- however, you could integrate it via changes to the model assumptions sections (e.g. say you think momentum will do very well, this year you expect it to do about 10%) - i hope this also teaches you that using a chart to derive an estimate is pretty much garbage, but here is how you could do it (this is very bad logically and is a known cognitive bias, but...*shrugs*) if you think linearly about a stock and this it is following a trend, your 1-year forecast would fall within that range (can take the average -- say 3700) to generate the ER given this linear forecast (lol), you would take 3700/currentprice-1 or 3700/3469-1 = 6.65% return you can do the same thing to factors (QMOM, QVAL, SPY, etc.) better ways of generating expected returns are through building blocks/fundamental analysis (not what your dad thinks fundamental analysis is lol; what equity research analysts thinks fundamental analysis is). example would be relative valuation -- if momentum p/e is currently trading at 25x and normally trades at 27x that would represent an 8% return (from the delta in multiples). you can use this in conjunction with some type of price trend forecast, but the data suggests that the past 5 years of returns is terrible in predicting the subsequent 5 years.
I'm not familiar with google sheets so I don't know where to look. It looks like you have hidden some data. Can you isolate where the problem is? Is it something that can be overridden?
In the spreadsheet the Target weighting is locked, It doesn't seem to be a formula, does it make any difference to the calculated results?
One thing to note: if you are using the sheet, when you load it, you need to go to the historical sheet and manually refresh the equation. Not sure why google sheet is doing this. You refresh it by opening the formula (hit F2) and delete "b10", close the formula, then reopen it, add back "b10" to where you deleted it, and then ctrl c and ctrl v in each of the "loading" cells you see
It's not. Check out Column K. When you start editing, you will get a warning about editing. Click OK. Hang in there, man. Your getting the keys to the kingdom. Brush up on the portfolio concepts that are unfamiliar.