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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » How to outperform the market – Can We?

How to outperform the market – Can We?

Go down  Message [Page 1 of 1]

1How to outperform the market – Can We? Empty How to outperform the market – Can We? Sun Jul 13, 2014 8:10 pm

hunter

hunter
Moderator
Moderator
When the markets go up, most of the investors make profits; when the markets go down most of them make losses.  It’s no brainer. But how good or bad are we compared to the market, is a good way to decide how effective our investment/trading strategy is. ‘Can we beat the market?’ is a question asked by many investors time to time.
Following is a gathering of some thoughts on, at least theoretically, to find if it is possible to outperform the market consistently with considerable margins.
For illustration purposes, I selected the period form 01 Jan 2012 to 31 Dec 2013. For market index, ASI was selected. Two popular counters with high liquidity were selected as a market sample for investment/trading performance calculations; JKH and SAMP.
I chose 4 methods of investment for performance comparison, namely;
1. Passive investment – buy at the beginning of the period and sell at the end
2. Bargain hunting- buy at the bottom and keep until the end
3. Active trading – swing trading buy buying at the bottom and sell at the top
4. Panic trading- inverse of active trading; buying at the top and selling at the bottom

Following diagram shows how ASI moved during the selected period.

How to outperform the market – Can We? Asi_ed11
------------
At the beginning, ASI has been around 6000, and after some fluctuations, at the end, it has returned to the same level. Therefore, there has not been any overall net market movement; hence, market gain is 0%.
Now, let’s see if JKH and SAMP would have helped to outperform the market.
First, let’s look at how the two shares behaved during the said period.
Here is how JKH has moved.

How to outperform the market – Can We? Jkh_ed10
----------------
Here is how SAMP has moved,

How to outperform the market – Can We? Samp_e10
----

Now, let’s calculate results given by each strategy.
1. Passive investor: A passive investor would buy at the beginning and sell at the end. This would give the following results.

How to outperform the market – Can We? Passiv10
- ----


2. Bargain Hunter: A bargain hunter would wait for the lowest price to buy the shares and keep until the end to sell. The results would be as follows.

How to outperform the market – Can We? Bargai10
----------------------------

3. Swing trader: An active swing trader would look for bottoms and peaks for buying and selling respectively. The results would be similar to the following.

How to outperform the market – Can We? Jkh_ed11
- - - --

How to outperform the market – Can We? Samp_e11
- - - --

How to outperform the market – Can We? Active10
------------------------

4. Panic Trader: Finally, those who are driven by emotions related to greed and fear would buy at the peaks and sell at the bottoms. The results would not deviate much from the below.

How to outperform the market – Can We? Panic_10
---------------------

If we average the results;
a. Market performance = 0%
b. Passive investor= 8%
c. Bargain hunter= 26%
d. Swing trader= 87%
e. Panic trader=-84%
It looks, as far as we don’t get panic, outperforming the market may not be difficult at all.
Well, how to avoid getting panic could be an interesting topic for another discussion.
What do you think?

Note:
• I have no intention of promoting any shares here.
• Neither I intend to promote any investment strategy
• Just sharing my thoughts so it might help someone
• Your views and comments will definitely help me so please share them

SHARK aka TAH

SHARK aka TAH
Expert
Expert
Way to Go Hunter Smile

Appreciate your contribution Smile

Shark

SHARK aka TAH

SHARK aka TAH
Expert
Expert
I am seeing something with such interest Smile

Shark

kkronline


Equity Analytic
Equity Analytic
What if you buy both at specific date on every month and averaging.

shadow walker

shadow walker
Vice President - Equity Analytics
Vice President - Equity Analytics
wow.. Good writing hunter..

NC

NC
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Once Warren Buffet says " In business world, the rear view mirror is always clearer than the windshield. Moral: Look at the past, observe it, try to understand and make it clear. If so only you'll see the future.
"So, work at it until the charts are talking to you, then be patient and wait until they do so clearly. Patience is the most important thing. We cannot take money from the market until it clearly offers it to us."

Good work bro !! Appreciate it..

stevenapple


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Hunter thanks for clever hunting methods. cheers

stevenapple


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@NC wrote:Once Warren Buffet says " In business world, the rear view mirror is always clearer than the windshield. Moral: Look at the past, observe it, try to understand and make it clear. If so only you'll see the future.
"So, work at it until the charts are talking to you, then be patient and wait until they do so clearly. Patience is the most important thing. We cannot take money from the market until it clearly offers it to us."

Good work bro !! Appreciate it..

Good one mate 1st look at the rear and then the windshield.

jonny

jonny
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Good work hunter.Keep it up.Thanks.

Jonny...

VALUEPICK

VALUEPICK
Expert
Expert
[quote="hunter"]When the markets go up, most of the investors make profits; when the markets go down most of them make losses.  It’s no brainer. But how good or bad are we compared to the market, is a good way to decide how effective our investment/trading strategy is. ‘Can we beat the market?’ is a question asked by many investors time to time.
Following is a gathering of some thoughts on, at least theoretically, to find if it is possible to outperform the market consistently with considerable margins.
For illustration purposes, I selected the period form 01 Jan 2012 to 31 Dec 2013. For market index, ASI was selected. Two popular counters with high liquidity were selected as a market sample for investment/trading performance calculations; JKH and SAMP.
I chose 4 methods of investment for performance comparison, namely;
1. Passive investment – buy at the beginning of the period and sell at the end
2. Bargain hunting- buy at the bottom and keep until the end
3. Active trading – swing trading buy buying at the bottom and sell at the top
4. Panic trading- inverse of active trading; buying at the top and selling at the bottom

Following diagram shows how ASI moved during the selected period.

How to outperform the market – Can We? Asi_ed11
------------
At the beginning, ASI has been around 6000, and after some fluctuations, at the end, it has returned to the same level. Therefore, there has not been any overall net market movement; hence, market gain is 0%.
Now, let’s see if JKH and SAMP would have helped to outperform the market.
First, let’s look at how the two shares behaved during the said period.
Here is how JKH has moved.

How to outperform the market – Can We? Jkh_ed10
----------------
Here is how SAMP has moved,

How to outperform the market – Can We? Samp_e10
----

Now, let’s calculate results given by each strategy.
1. Passive investor: A passive investor would buy at the beginning and sell at the end. This would give the following results.

How to outperform the market – Can We? Passiv10
- ----


2. Bargain Hunter: A bargain hunter would wait for the lowest price to buy the shares and keep until the end to sell. The results would be as follows.

How to outperform the market – Can We? Bargai10
----------------------------

3. Swing trader: An active swing trader would look for bottoms and peaks for buying and selling respectively. The results would be similar to the following.

How to outperform the market – Can We? Jkh_ed11
- - - --

How to outperform the market – Can We? Samp_e11
- - - --

How to outperform the market – Can We? Active10
------------------------

4. Panic Trader: Finally, those who are driven by emotions related to greed and fear would buy at the peaks and sell at the bottoms. The results would not deviate much from the below.

How to outperform the market – Can We? Panic_10
---------------------

If we average the results;
a. Market performance = 0%
b. Passive investor= 8%
c. Bargain hunter= 26%
d. Swing trader= 87%
e. Panic trader=-84%
It looks, as far as we don’t get panic, outperforming the market may not be difficult at all.
Well, how to avoid getting panic could be an interesting topic for another discussion.
What do you think?

Note:
• I have no intention of promoting any shares here.
• Neither I intend to promote any investment strategy
• Just sharing my thoughts so it might help someone
• Your views and comments will definitely help me so please share them[/

I really like this. I can get some ideas about investment strategy. Thanks.

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