A thoroughly impressed newbie here. Excellent site.
A question, though about building credibility for what are “black box” R2G models.
I’ve noticed that new R2G designers are building credibility by increasing their detailed model descriptions and interacting a lot with the community. It makes a big difference in choosing which R2G’s to consider.
As well, long term designers have many years of history, models, sims and ports to prove their expertise, and have already established credibility thereby.
But, the measure of any financial model is the designer’s willingness to put their own capital at stake.
Would it be worthwhile to “certify” an R2G design through a designer’s commitment to creating a personal non-trivial portfolio for that design with their own capital?
Not sure what non-trivial is: perhaps $10K? $25K? Also not sure what method could “certify” that the portfolio is active and measurable by P123.
I’d certainly give more credibility to an R2G if I knew the designer had meaningful capital at stake in it.
Any opinions?
Again, great site, and immeasurable knowledge here for the portfolio investor. Many thanks.
Interesting idea. We’re going to have auto-trading soon. In short you will be able to auto-trade a strategy simply by providing your brokerage account number and the amount to invest in the model.
It would enable us to do many things. For example a “certified” r2g model would:
require the designer to be one of the investors
allow the designer to set a maximum portfolio size per investor
the only way to follow the model would be with auto trading
all trades would be placed at the same time to avoid front-running (there might be ways to hide trades until all subs are filled).
We would make this an option for the designer, but as you say, it would make their model vastly more appealing. THe biggest incentive for the designer would be that they could control the amounts each subs is allowed to invest. As you probably figured out many R2G could suffer from lack of liquidity if some of the subs use portfolio sizes too large.
[quote]
It would enable us to do many things. For example a “certified” r2g model would:
require the designer to be one of the investors
allow the designer to set a maximum portfolio size per investor
the only way to follow the model would be with auto trading
all trades would be placed at the same time to avoid front-running (there might be ways to hide trades until all subs are filled).
[/quote]I like the concept overall, but it’s still not foolproof. A designer would still be able to front run it by creating a duplicate of the R2G as a personal portfolio.
[quote]
We would make this an option for the designer, but as you say, it would make their model vastly more appealing. THe biggest incentive for the designer would be that they could control the amounts each subs is allowed to invest. As you probably figured out many R2G could suffer from lack of liquidity if some of the subs use portfolio sizes too large.
[/quote]True. However, in a way the present R2G system has a liquidity advantage because subs are not machines and place orders at different times. Besides, some subs may be investing very little money, or are timing the market (and are temporarily out of the market) or are on vacation or don’t place the trades right away for some other reason.
On the other hand with the current R2G system, if a sub overwhelms the liquidity of a stock he would be hurting himself too. This fact encourages the R2G designers to warn their subs to go easy on the liquidity and it also strongly encourages the subs to limit their order sizes.
"Interesting idea. We’re going to have auto-trading soon. In short you will be able to auto-trade a strategy simply by providing your brokerage account number and the amount to invest in the model. "
For those who did not know me well, I have been using portfolio123.com since 2004 and I have > U$100k of my personal money invested in all the stocks picked by my four R2G models.
Steve, many thanks for the compliments. This year, stock market condition has been kind to the micro-caps and small-caps so far. There will be time when large caps will perform better.
Terry, I have posted my comments in my R2G model page as well.
My opinion on checking whether an R2G model is effective or not is that there is a fine balance between number of transactions an R2G models generate per year vs. the average return per transaction of that R2G model. As an R2G model designer, I try to attain high average return per transaction with lower frequency of trades even if the model need to subject to higher drawdown.
This is because every real life transaction may have some form of slippage against the model transaction no matter what liquidity value that particular stock has (one reason is due to our manual entry of trades every Monday morning - some personal emotion and temperament involve here on the buy side as well as sell side as we try to follow the model and nobody is perfect, we only get better over time with experience).
If the average return per transaction is too low even when the liquidity of the stock involve is high, the R2G is still not giving good decent return to us due to above. That’'s just some of my personal observations using my own models all these years with portfolio123.com.
Just wanted to compliment the folks who are taking the time to develop and embed comprehensive explanations of their R2G logic. I noticed both Tomyani and Stitts in particular have invested in significant and deeper discussions of their trading logic. Real credibility builder for the newbie. Not in any way to minimize others’ similar work; I just noticed Tom and Stitts first.
On the other hand, charging $X9.99 per month seems a bit Walmart… [:))] for those doing it. That 12 cents/year bargain just compels me to leap on the models that do it. Just kidding…
Seriously, thanks. I’ve learned more practical analysis in the last six months on this site than any other source I’ve ever used.
With all due respect to your time and skill invested in developing these models, for a subscriber to shadow what you are doing with your 100,000 the net cost to them for P123 and subscription fees would be 3-4%. Thats a pretty large slice to justify over time when so many options are available.
Yes the numbers are good but these are models and to maximize the benefit need to be followed in good times as well as bad.
Doug - Wuu Yean is simply stating that he is investing in his own models with a significant amount of money, not that you can/should do the same with $100K. This offers some comfort value for those thinking of subscribing to his models.
As with any purchase or subscriptions, you need to compare products and alternatives. For example, if you were to invest in a hedge fund or mutual fund, what fees would you pay? What are the restrictions? It isn’t his problem to adjust his prices to fit your budget, but your problem to find the best investment to fit your budget.
No offense meant Steve but budget was nowhere near the point. If we are going to discuss numbers and performance here then all costs should be considered in the plan.
It just seemed to me that 100k was not enough to justify 4 subscriptions (using the context that he provided).
I am here to learn and certainly my “budget” is no ones concern.
Doug -
EDIT - the context of this thread was that the developer should put meaningful capital into his ports (put money where mouth is), not that subscribers should be able to “shadow” the ports with the exact same amount of money.
Is there any chance some of these models can be combined and offered as a closed-end fund - sort of like a fund of models. Portfolio123 would be the fund manager, but each R2G designer who contributed could receive a portion of the management fees.
One problem with the current performance numbers reported is that “real world” model returns can vary tremendously based on how effectively the model is traded.
You can make your own portfolio, if you like. Just subscribe to two or more models (or design your own) and you can combine them to your liking. The BOOK feature lets you backtest the combined results of several models.
The choice is yours. If you pick a model that has high liquidity, it will be easy to trade.
