top of page

Actively managed portfolio (for comparison)

For the regular readers, you all have probably seen that I have started a passive portfolio (with a target of rebalancing annually) since the start of this year. I provided regular monthly updates to this portfolio and you can see these posts throughout my blog. The objective of that portfolio is to be really passive with little need to do any tinkering and yet still beats the Vanguard 500 index over time. That's probably suitable for individuals who are busy with their daily life and do not want to spend too much time doing any investing research work.

Sometime last year, I also wrote an article on another actively managed portfolio which was conceptualised to beat the market. Much of the backtesting and coding was done on the Quantopian platform which is now closed. I'm still pretty upset about it as it was really quite a user friendly platform for quants to test out their codes, do backtesting and attempt to beat the market.

Since the closure of Quantopian, I have always been thinking of creating another actively managed portfolio using another platform. After some research, I have found a suitable platform- though it's a bit different as per the previous one.

On Seeking Alpha, you will find this section which highlights Seeking Alpha's Quant Performance. Basically, it's a portfolio which consists of equally weighted stocks which have "Very Bullish" quant performances and is rebalanced on a daily basis. The ratings on the quant performance of each stock are based on a comparison of its score in 100 over metrics across various categories (eg. Value, Growth, Profitability, Momentum, EPS Revision) against other stocks in the sector.

Based on the backtesting results since 31st December 2019, this trading strategy seems to have a total return of +1761%. In comparison, S&P 500 returns +367%.

I figured that it's quite possible that Seeking Alpha is probably going to be better than me in doing up these quant performance metrics and it won't make too much sense for me to reinvent the wheel to try to come up with better quant performance metrics. Hence, I decided to adopt the stock selection model from Seeking Alpha and add in my own twist for my actively managed portfolio.

Based on the selection of stocks which have "Very Bullish" quant performance, I will choose the top 10 which have the highest ratings. From these top 10 stocks, I will choose 5 most uncorrelated stocks to ensure diversification. Hence, this actively managed portfolio of mine will only have 5 stocks at any one time and the constituents will all be equally weighted. This exercise will be repeated on the first day of every month and readjusted accordingly.

I will start in June. The choice of the first 5 stocks are currently MARA, BGFV, FINV, BXC and IMPUY. The next round of adjustment will happen on 1st July. The performance of this actively managed portfolio will be reported on a monthly basis together with what's reported for the passively managed portfolio.

(Source: Portfolio Visualizer)

Future updates of the constituents of this actively managed portfolio will be made only to patrons. If you are interested, do consider signing up as one.

389 views0 comments


bottom of page