Setting up your first strategy

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    Setting up your first strategy

    Gordon Cooper

    Hi Alex-

    I have a 401k at Vanguard which limits investment choices to a fixed list of 53 mutual funds. I have some general questions on setting up a strategy for this account.

    1) Of all the canned strategies included in QT 311S, would you point to one of them as being particularly suitable to trading Mutual Funds?

    2) Would you suggest importing all 53 mutual fund tickers into QT and into the strategy backtester? I ask because my experience with ETFReplay (another ranking algo) shows that the composition and quantity of tickers in the list is critical to decent performance. It seems that performance deteriorates markedly if lists become too long or contain too many tickers with similar characteristics. I can email you the list of 53 mutual funds as I do not see a forum upload link. Of the 53 tickers I am limited to, there are about 40 US equity funds (sm cap, large cap, growth, value index etc) about 5 international equity, about 10 bond funds and four US equity sector funds (precious metals, energy, healthcare and a REIT fund).

    3) For mutual funds what look-back period would you suggest generally? 3-months, 6 months? 4.5 months?

    4) Please provide any other insights you may have regarding setting up a Mutual Fund only strategy.




    Hi Gordon,

    thanks for the comment, great topic as using MF or ETF of the big plan sponsors is one of the things we have on the list.

    1) I would not say that one strategy in particular is more suitable for MF. It rather depends on which proxies or similar MF you find to replace the ETF we´re using. For example some like ZIV in MYRS will be hard, while the ones in UIS, GMR or GSR are rather easy. You can also use a mix of MF and ETF, for example run MF in your IRA and ZIV from savings account.

    2) You can import all MF into QT to have them available. One way is to import them as a “symbol list”, but then you can´t pick them individually for a strategy, but only the whole list. So best is to Copy&Paste them one by one as new symbol, or send me the list and I paste them for you with a little trick.

    Using more than lets say 10 MF in one strategy will not render good results. Look first for the fundamental reason of why to combine some of them. What´s the fundamental performance driver of your strategy? Sectors, equities, bonds, global assets, commodities? Pick ones that have bout the same volatility. Some should have low or negative correlation to each other. The reasoning of our strategies might be a starter, or look for other asset allocation strategies.

    3) Lookback depends on their volatility and other factors. Run a quick optimization to see in the heatmap where you have stable ranges. In many cases it´s around 50 to 70 days, or 2-3 months.

    4) Benefit of using MF, especially Vanguard, is that many have a long history – but others don´t. So pick the ones with at least 10 years history, even if you might want to use other similar ones in real trading due to being free or any other reason. But first backtest 10 years, and then confirm on a shorter timeframe with the same parameters.

    Finally, feel free to open a dedicated topic here in the forum and use services like, or to share your screenshots – I´m sure other community members will then jump in, and we can support.

    All the best,

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