This is the continuation of the first part of this study
in which has been explained how much the performances of the portfolios
were improved by adding various length delay filters to the former
Price Momentum Weekly portfolio. Let's see now what happens to the
number of orders to execute and the number of stock to hold in the
Ultimate Price Momentum Series portfolios.
This is a very interesting fact about using those
delay filters because not only it had improved by a lot the overall return
of the portfolios but it had also reduced the number of transactions by a
factor of 4 for 3 of the portfolios (v3, v4 and v5). So, not only, you can
expect more from your investments in terms of returns but it also cost you
less (in commissions) to build those high-performance portfolios.
Also, note how the mean number of orders per week goes
lower when the filter delay increases. This is a big asset for those
portfolios which could expect less than one order(a buy or a sell) per week, and
that is very convenient for people who want an easy way to manage their portfolio.
Of course, as everybody would have expected these
results, using the delay filtering strategy reduces the number of stocks
to hold in the portfolio.
As far as the Price Momentum Weekly portfolio is
concerned, it has a fixed limit of 3 stocks minimum and 10 stocks
maximum to hold at any time.
Theoretically, the Ultimate Price Momentum Series
portfolios have a minimum limit of 0 (that has quite some chance to be
reached one day) and the same maximum limit of 10 (That has very low
probability to be ever reached, even for the 1-week delay portfolio). But
practically, those limits (especially the upper one) have very little chance
to be ever reached, and it could expected that the trend showing in the
above table will continue, so that you can expect that the longer the
delay, the lower number of stocks to hold. That is a great improvement for those that
want to invest a lower capital but do not want to have too small holdings
killed by commission costs, but at the same time, reducing the number of
stocks hold also increases the volatility of the portfolio, and that is the
main drawback of the longest delay filtered portfolios.
What conclusion to draw?
So, everybody should now be wondering "which one is the
best, then?". Well, there is no obvious answer.
What is clear after this study is that if you want
to copy the orders of one of our portfolios, then do not choose the Price
Momentum Weekly, it is now obsolete. Any of the Ultimate Price Momentum
portfolios shows better performances, triggers less trades and holds less
stocks.
But which one of the five to use? It all
depends on your investor profile. The performances of the five
Ultimate Price Momentum portfolios have to be seen as comparable
because it is not clear yet if one can sustain the lead. But what is sure is
that the longer the delay filter, the less trades you have to do
and the lower number of stocks you have to hold. The portfolio with
the longest delay filter also show the best ratio of winning/losing
trades. But they also come with the highest volatility, so the
highest risk.
Nobody then will be surprised to hear as a
conclusion that the best Ultimate Price Momentum portfolio for you is the
one that matches the more your own risk versus return profile. That is
the same old story you will here everywhere in the investment world...
