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Performance of Composite Trend Indicator

Visitor: You spoke of "High Performance - Low Maintenance" Tell me about the track record?

Routemaster: Some of our strategies don't lend themselves to easy measurement because they use forecasts, for which past records aren't available, or in the case of valuation strategies, because they are only suitable for overall rankings.

However, where we can, we have tested a wide range of strategies as thoroughly as possible - that is to say for every country in each region going back to 1966. That is a huge range of conditions to test any investment strategy and includes over 10,000 monthly observations.

We also applied noise reduction techniques to keep portfolio turnover costs down to an acceptable level for long-term investors - ideally two transactions per investment annually. That is to say one buy and one sell decision each year.  Hence "Low Maintenance".

We then combined the most effective strategy of each type into a Composite Trend Indicator. This includes charting, economic and seasonal strategies. The results were then graded as 'Buy'  where indicators are unanimously positive, 'Add' where a majority is positive, 'Reduce' where a majority is negative and 'Sell' where they are unanimously negative.

NB The logo P/T is for Professional Investment Tools Ltd., the old name of this company when this chart was made.

To make the chart as fair as possible, the data relates to total returns (not cash), results are shown relative to a global benchmark (not in absolute values), this benchmark is un-weighted (not market capitalisation weighted) and the chart uses logarithmic (not linear) scales. Please note the very large range of divergence in cumulative performance indicated by the vertical axis.

The combination of individually effective investment strategies often results in a geometric improvement in performance. That is how such results are achieved. Since going live we have extended this principle, revising the formula to include ever more strategies. The subsequent good real-time performance confirms the principle in practice. Hence "High Performance".

Of course, past performance is no guarantee that these strategies will continue to work. Different strategies fail in different circumstances and all of the strategies fail for some of the time, as they did after L-Day in 2008. Nevertheless until human behaviour changes, this is the best that can be done.