Could Someone Provide Me Insights on Portfolio Allocation Strategies

[Gianna]

Hello everyone

I hope you r well. I m going out to the community to get insights and experiences with portfolio allocation techniques; specifically when using the Logical Invest platform. As someone who is interested in improving my investment strategy; I feel that sharing our experiences will lead to a better understanding of effective tactics.

I hve been researching various asset classes and investing instruments; such as ETFs; options; and even cryptocurrency. I m at a crossroads when it comes to selecting how to best deploy my capital. My primary goal is to strike a balance between risk management and prospective profits; and I m particularly interested in how others have approached this task utilizing the tools accessible on Logical Invest.

How do you establish the optimal asset mix for your portfolio? Do you have any special guidelines & models that you follow? I would like to learn how different techniques have worked for you.

How do you track the performance of your portfolio over time? I want to be sure I can accurately measure the success of my investments and make modifications as needed.

How frequently do you examine your portfolio allocation? Given the volatility in recent markets; I m curious about how you adapt your techniques to shifting economic conditions.

What parts of the Logical Invest platform have you found most useful for managing your investments? Any suggestions for maximizing the usage of these tools would be highly appreciated.

Also I explored some topics related to this https://logical-invest.com/forums/topic/experienced-investors-devopsonlinetraining-portfolio-compositions-using-logical-invest-strategies/ but I did not get the sufficient solution of my query so I would really want to get some help from a more experienced person

I welcome any feedback you may have, since I feel that pooled knowledge may help all of us make better decisions. Thank you in advance for your responses; I look forward to engaging with you all!

[Mark Vincent]

Hello Gianna,

In my opinion, the best thing you can do is learn Quantrader inside out. I Don’t think you need to recreate the formulas and logic but have a high level understanding of what the software does. Spend time learning how the 0 LI strategies of strategies works. More specifically understand the following:

1. Higher volatility means higher risk. Cash equals low volatility lower risk. Bitcoin = High volatility high risk. Quantrader allows you to optimize the volatilty based on your own risk. The great thing is even if your ultra conservative you could just allocate 1 or 2 percent to a high risk strategy like Bitcoin and not see your overall risk and volatility increase a lot. Again you need to learn the software and how to do this.

2. My optimal asset mix is based on my customized strategy of strategies. For example, I still think until the governments of the world step in and regulate the MAG7 stocks they will continue to dominate. Therefore I created a low vol MAG7 strategy and high Vol MAG7 strategy and combined them into a Mag7 balanced strategy. I dropped the Nasdaq 100 strategy. Just personal preference no right or wrong. I also think inflation will return so I use a strategy with GLD, VNQ and TBT. Today I created a strategy with Oil transportation companies. I then put all these into a strategy of strategy system with many other macro themes and the best ones rise to the top. The best part is if I am wrong the bad strategies will go to the bottom of the ranking and not be suggested each rebalance. The possibilities are endless based on your own forecast of the Macro environment. If you want to keep it simple you can just use the LI strategies that best suit your overall risk tolerance and investment style.

3. I track my investments in my brokerage account and compare them to LI I have not had any problem with slippage since I trade very liquid stocks like MAG7. The results are very similar. If you have traded for a long time you will know if the system you created has good profit per trade and low slippage. If you don’t know what slippage is you need to learn it. It is a system destroyer if not controlled.

4. I modify the strategies once a year. I try to create an all weather system like 0 LI strategies of strategies with the above modifications. Once you create a few systems you will see that modifying it to much is curve-fitting and you don’t want to do that. There are some exceptions. I also create systems in QT for risk on or risk off. When all the systems are risk off I pause and listen and reduce my exposure. This rarely happens so I try to stick to the plan.

5. The most useful part is the QT software could not live without it. That being said there is no mechanical trading system that works all the time. 2022 was a very rough year since there was a lot of rotation in the markets and no clear direction. The backtest gives you conviction to execute but it’s not a silver bullet. There are no perfect trading systems just tradeoffs between each system.

Note: These are my opinions and I am sure others have completely different opinions so please do your own homework and feel free to ask.

Cheers,
Mark V.

[jgold437]

I personally use the QT Software for trading strategy development. I don’t use the QT software for overall portfolio building as I have a handful of other trading strategies (mostly options) that I can’t fit into the QT software. I think that it’s something I’ll look into, as I do really value having negatively correlated strategies, but haven’t found the time yet.

I use an excel sheet for my overall portfolio and I make some assumptions about how certain trading strategies/accounts behave and have an overall idea of how correlated the strategies are. For example, my short VIX strategies make money in a flat/up market typically, while loses in a down market (similar to a long equity strategy). I also trade both a modified DOW30 and NASDAQ100 strategy and in my portfolio allocation, I consider the $$$ allocated to the strategy as long equity. While this isn’t perfectly mathematically optimal, I’m more for a simplistic view that is easier to manage.

I’m with Mark that I adjust my strategy parameter/allocations around once a year. It’s not something that I have a predetermined schedule for.

One aspect of QT that I find very helpful is the optimization tool for the strategies. This is because I’m not really looking for the most optimal parameters for a strategy, but looking for the most optimal “range” of parameters; and the optimization matrix shows these ranges easily.

My last advice is I agree with Mark to understand the logic of QT Strategies, basically using a specific set of parameters, what does that mean? How are the stocks selected? Do you care how volatile a stock is or just care about return? etc ….

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