What’s the best strategy here? Would you set the stock with highest growth potential to a high percentage? Or do people just split it all equally e.g. four stocks at 25% each.
I created a pie with ETFs. If you play around with the percentages, you will see that increasing one instrument and decreasing another will make a big difference based on the past data.
I added 3 ETFs and based on 33% it gave me about 6 or 7%. Eventually the optimal weight gave me 11.5%.
Ok that makes sense.
It would be cool if there was an algorithm in a future update that would allocate your holdings automatically to give the highest return, rather than doing it manually like your method.
Yes this is the initial setting, but I wonder how this is going to work after a while. Do you have to manually change the weighting? Getting more complex with more instruments in a pie.
This is tricky since it’s based on historic data which is not a guarantee of future performance.
Past will not provide for guaranteed returns in future… Using that analogy in wrong time ie bubble could lead to very misinformative decisions
Yes you’re right. Like that guy here who made a pie with AMD and got a potential return of $1 Trillion dollars.
So you don’t really take past performance into account? How do you select your holdings for the pie, and allocation?
And how do you re-weight stuff down the road?
I’ve created my own fund of 50 US listed stocks: https://docs.google.com/spreadsheets/d/1XoINMTB3NmYRKwdBfIMR6gHTf05feQiI_Dwk6ybq6JI/edit?usp=sharing
The stocks are basically just my picks, then the weighting is calculated by market cap. I’ve then significantly adjusted the weightings to make them more even and reduced Alibaba significantly. I’ve significantly increased the weighting of the smaller caps to increase growth potential and risk.
I’m probably not actually going to implement this in it’s current state as the T212 pie is only up to 1 decimal place on percentage. And I will need to adjust some holdings still, then wait for some of them to become fractional.
I saw everyone’s pie’s having predicted returns of around 20 to 30% per year, mine are all under 6% .
I guess the algorithm thinks I selected too many european stocks and those hit by Covid-19.
my predict returns are about 11% seems a bit more realistic, though once I set my deposit schedule to daily it suddenly thinks I will deposit £22m and hit a result of £53m in 15 years xD
Yesterday, we fixed the issue with the daily calculation, it’ll be fine after we push the next update
great. now I just need my pie to actually buy some holdings xD all £44 of my free funds are sitting around doing nothing and there is supposed to be £11 a day after that xD
am I right to assume weekends are also treated as deposit days for the pie daily schedule?
Something’s wrong with your pie, or it’s just waiting for US market open?
Yes, every day is a deposit day Here is exactly what will happen during the weekend assuming daily deposit of £10.
Saturday: £10 get deposited into the pie and orders get placed
Sunday: £10 get deposited into the pie
Monday: £10 get deposited into the pie. Markets open. Saturdays orders get filled. New orders get placed with the remaining £20.
Tell that to Martin McFly
Well the pie has to wait for both LSE and the US market to be open and seems to not move currently. Tomorrow deposit will be decider.
Here is another method of calculating the weightings of a smaller portfolio: https://github.com/nickspacemonkey/efficient_frontier/blob/master/efficient_frontier.py
This method is probably better suited to a smaller portfolio as oppose to sorting by market cap for larger ones.
I have taken the FAANG stocks plus Microsoft, and taken the daily closing price from yahoo since 01/01/2010. This data is used to calculate covariances and average daily returns. 2500 random portfolio weightings are then created with standard deviations and returns calculated using the covariance matrix. These portfolios are then plotted to help visualise expected return for amount of volatility taken.
The optimal portfolio would get the higest return for least amount of volatility taken. The weightings and other pertinent data is shown in console:
looks like a very useful tool. can you guide me in its usage via DM?
That’s pretty cool. I can just stick any tickers into that stocks list? Probably USA only right?
Or just add a wiki https://github.com/nickspacemonkey/effecient_frontier/wiki so everybody knows it