Mechanical Investing: Main Resources and FAQs
Book 1: Guide to New Mechanical Investors
New arrivers to the world of "Mechanical Investing" should start with David Trammel's (LAPropDoc
) comprehensive beginner's guide, linked below. The basic principles are timeless. When you've perused that, several significant additional approaches and techniques were developed later (linked to from other sections of this wiki). Note
: Be advised, stunningly high advertised returns circa 2000 are a quaint reflection of the Internet bubble that particularly inflated many MI momentum screens from 1998-2000.
The Guide to MI
- Additional information: Doc's discussion board on TMF to discuss details, new learnings, questions and answers on the Guide and the basics.
Book 2: The Updated Guide
- Mungofitch summarized 4 years of additional experience in 2008: The realtime investing experiences and backtests by many board members amended some of the principles from the original guide.
General Screen Information and the Taxonomy of Screens
General Screen Information
Screen Definitions The screen etymology and detaileddefinitions.
When were all these screens created?
Above all, mechanical Investing depends on backtesting of screen ideas. There are several, listed at the BackTesters
- Fast search utility for crawling specific mechanical investing-related message boards on TMF.
Actual performance of all screens if traded weekly. Tracked and posted by Bill2m. Posts contain YTD and TTM performance for 3, 5 and 10 stock versions. An Excel spreadsheet is available containing every week for every screen going back to inception or 2001.
Bear market experiences in the 2000s taught hard lessons: there are times when everything
loses. The chances of significant losses - especially
MI screens - greatly increase during the times. Defense
against significant portfolio drops ( drawdowns
) is provided by these TimingMethods
The original fundamentals of the basic approach, revised by (thenTMF)Elan in 2001. Considered the "pre-MI" guide. Some of the content and the screens referenced has evolved or become disused. Basic terminology definitions are at the end of the post. Also references the original MI guide above.
Foolish Workshop FAQ
What about cash?
Can I do something to improve returns on cash and remain relatively safe when I'm avoiding screens?
Cash at .1% per year is definitely annoying. If you are willing to move money into ETFs for the best six days of the month, selling and remaining safe (in cash) the other 15 or 16 days, you may be interested in the "Superior Six" trading strategy. A few key articles for you:
Superior Six & Predictors Superior Six ETFs... Superior Six Optimized
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