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Portfolio123 » List all forums » Forum: Simulations and Portfolios » Thread: Portfolio Simulation buy rules |
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synchro
Advanced Member
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Another question: let's say my position sizing is 7% of portfolio, which implies approx 14 stocks in the portfolio if fully invested. At any point in the projection, if there are 15 or more stocks that qualify under the buy rules, and none qualify for the sell rules, what would happen? |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Offline |
Michael, When the Sim is buying stocks it is comparing the stocks to the buy rules only and does not consider the sell rules. The Sims always first compares the stocks that are currently held to the sell rules. If a stock or stocks are sold, then there is cash to buy additional stocks with. The Sim will then buy the highest ranked stock or stocks that meet all the buy rules without regard to the sell rules. With respect to your earlier question about staying fully invested: This will be limited by the restrictions that you set on page 1 for “Ideal Weight New Pos”. If this value is set too low, and the cash available from the sale of stocks is less that the value set then a stock will not be bought, and the cash will be held until the next rebalance. Also, if the cash available is significantly greater than your Ideal Weight New Pos value limit for buying one stock, then the Sim will buy one stock and hold the remaining amount in cash. For example, if you set the % Market value to 10% and the Ideal Weight New Pos to 10% then the Sim will spend a cash amount between 9% and 11% to buy each stock. If the Sim sells a stock that has fallen in value to 8% of the total portfolio value then there will not be enough cash to buy a stock within the restrictions of the Ideal Weight New Pos setting. Likewise, if the Sim sells a stock that has increased in value 50% then the Sim will only be able to buy one stock, because it will not have enough cash to buy a second stock. Buy increasing the Ideal Weight New Pos to a higher value you will give the Sim a better chance of staying fully invested. I always use 40% or 50% in my Sims because I would rather stay fully invested (when there are stocks that pass my buy rules) than be equally invested. The above does not apply to the case that Oliver explained to you in your earlier question. If you use a sell rule of “1” and set “Allow sold stocks to be re-bought at current rebalance” to Yes, then the Sim will always be fully invested and hold a balanced portfolio. Although I use this approach in many of my Sims, it does not allow for the use of sell rules that are independent of the buy rules. Denny  ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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synchro
Advanced Member
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thx for the detailed explanation. Very helpful. |
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Re: Portfolio Simulation buy rules
