Rightio, so let's have a look at stock selection. To do this I use Portfolio123 so we're going to focus on US shares. www.portfolio123.com.au . Btw I am getting ASX and NZX shares added to Portfolio123 so stay tuned.
There are two different ways to come up with a stock basket to trade.
1. The easy way - let other people do it for you
2. The hard way - DIY, we'll look at examples further on.
In these examples I am going to show you the easy way.
Firstly let's look at what a stock index is. Really it is just a portfolio of XX number of stocks with stocks getting added to and removed from the index every so often..it sounds rather like a portfolio doesn't it. In fact most funds are invested into this type of portfolio (i.e. a stock index such as S&P500 in US or ASX200 in Australia etc) and that's where your superannuation goes.
So here's a question for you, which index would you rather trade... the blue one, which is the S&P500 index or the red line which is a basket of 20 stocks that makes up part of the S&P500 index at any one time?
The red line averages 25% with a 24.5% drawdown whilst the S&P500 ETF Trust (which mirrors the S&P500 index) has averaged 2.5% with a 55% drawdown.
You can find out more info by going to www.portfolio123.com.au and clicking on the Ready 2 Go portfolio tab. This portfolio is put together by a guy called Hemmerling, not by me.
The red line includes survivor-ship bias, brokerage and slippage.
It obviously makes far more sense to focus your attention on those stocks that are more likely to outperform the market and therefore just trading the 20 stocks that make up the red lines performance is going to result in a better outcome than trading all of those stocks in the S&P500 index itself.
Next I'll explain what the red line represents, how the stocks are selected and what you'd need to do each week to make those stocks part of your basket which you can then apply the technical system outlined above to.
ZZ...
There are two different ways to come up with a stock basket to trade.
1. The easy way - let other people do it for you
2. The hard way - DIY, we'll look at examples further on.
In these examples I am going to show you the easy way.
Firstly let's look at what a stock index is. Really it is just a portfolio of XX number of stocks with stocks getting added to and removed from the index every so often..it sounds rather like a portfolio doesn't it. In fact most funds are invested into this type of portfolio (i.e. a stock index such as S&P500 in US or ASX200 in Australia etc) and that's where your superannuation goes.
So here's a question for you, which index would you rather trade... the blue one, which is the S&P500 index or the red line which is a basket of 20 stocks that makes up part of the S&P500 index at any one time?
The red line averages 25% with a 24.5% drawdown whilst the S&P500 ETF Trust (which mirrors the S&P500 index) has averaged 2.5% with a 55% drawdown.
You can find out more info by going to www.portfolio123.com.au and clicking on the Ready 2 Go portfolio tab. This portfolio is put together by a guy called Hemmerling, not by me.
The red line includes survivor-ship bias, brokerage and slippage.
It obviously makes far more sense to focus your attention on those stocks that are more likely to outperform the market and therefore just trading the 20 stocks that make up the red lines performance is going to result in a better outcome than trading all of those stocks in the S&P500 index itself.
Next I'll explain what the red line represents, how the stocks are selected and what you'd need to do each week to make those stocks part of your basket which you can then apply the technical system outlined above to.
ZZ...