Just hypothetically. Let's say you were going to dollar cost average X amount per month for the next many years. So you randomly choose say 15 stocks. You will dollar cost into that 15 stock basket (as it may change below) X amount per month for the foreseeable future. The question is under what strategy do you think you will come out ahead: 1. DCA equal amounts into those 15 stocks forever and ever. 2. DCA equal amounts into the [5] of those stocks that have done the best since you have held them (no amount gets DCAd into the others). 3. DCA equal amounts into the [5] of those stocks that have done the worst since you have held them (no amount gets DCAd into the others). 4. 1 or 2 above, but also DROP the worst performing [5] stocks in your basket since you've owned them and replace it with [5] more random stocks. Thoughts on which of the above would be best in the long run? Obviously it is easy to see some other deviations you might do to improve it. All open to any thoughts! Thanks!!
#4 I’d rank stonks and invest into the top 15. No need to pyramid into the winners as they get bigger by themselves. I’d rebalance as soon* as a stock is dropped and replaced from the top 15. A simple rank such as % from 52W low (Desc) Filter for stocks Trading no less than 20% from their high With a market capitalization of 1B or more OR Trading above their 200 and 50 sma With a market capitalization of 1B or more BUT I think volatility has to be taken into account for position sizing. Higher ADR stocks would require less exposure than lower ADR ones. IF You have to invest into 2 stocks, One with ADR(20) of 5 One with ADR(20) of 2.5 Then 33% of your portfolio should be put into the first one and 66% into the second one. Footnote* By ‘as soon’ I believe a cushion would be wise, Maybe a stock should be delisted for X days or Y ranks before it’s actually sold and replaced.
DCA into 15 tickers making NHs on Monday -> cover at +0.10*beta -> roll into new shares with each cover.
That's what I thought but how do you DCA into the 15 tickers making new highs on monday? Can you give me an example with ABC which made a new high on Friday? Is the entry is at open if it makes a new high? I don't understand (0.1 * beta) for an exit. What would be the exit for ABC? Is there a stop?
Stocks that hit NHs on Friday -> buy Monday AM. The entry is your issue. Cover any position if it the gain is = beta * 10% -> redeploy in new NH tickers. Say XYZ has an 0.8 beta. 0.8 * 0.1 = 0.08 (cover 8% higher than entry). ABC has a 1.2 beta -> 1.2 * 0.1 = 0.12 -> cover at 12% gain and use gains as source of funds for new pos. Stops, again are up to you. Symmetric?
That's pretty good, but I'd throw a variable in there for the vix... to assign a downside stop assuming he's buying relatively liquid stocks with an average volume north of 1.5M at least, and it would have to be at least 4 trading days after an earnings report with the volume back at pre-earnings levels. But yeah, that's pretty good. Especially in a dull market.