📈 Backtesting 'Winner Indexing' Strategy: Top 5 Market Cap Stocks

In this video, I'll reply to @TheWickedWay comment of adjusting my "Market Leader 5" Strategy to a more focused approach of only keeping the top 5 market cap companies and selling the ones that drop out. It's even more an indexing strategy than a buy-and-hold strategy which could negatively affect capital gains and transaction costs -- but not for all investors. Some can tax-efficiently trade within specific government accounts etc.

Nothing in this video is financial advice - just math, backtesting, and education. DYOR!

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[newxs]

Hey man, found channel out of luck and it's very interesting. Ty for all the work, finally someone who's trying New stuffs !

[andys]

Great video! Do you know what the sharp ratio is of the portfolio at the end?

[mircea_h]

Interesting back tests! Nice thought exercise

I think this strategy gives high weight to bubble stocks, so the falling bank scenario has big chance of repeating.

Maybe cap the max weight? Maybe filter out crazy PE like Cisco in the 2000s.

Growth ETFs have some growth criteria in the rating, like sales growth, earnings, etc. to somehow measure the quality of the business also

[HenryJames-cswl]

You should try with a 20% trailing stop loss

[navinuttam]

Isn't this almost like creating a new Index "Finxter Top 5 " -- Lesson - choosing a narrow top index will generally outperform a wider index like S&P 500 (that carries more dead weight around)

[TheWickedWay]

One more quick question just for clarity. When your new formula sells a stock, because it fell out of the top 5, does it reinvest all of that money into the 1 new stock that just joined the top 5, or did it spread the money from the sale of the stock into the new one, as well as the other 4? For example, lets say that you sold a stock because it fell out of the top 5, one that has been in there for a while. Lets say it's worth has got up to ~$20K since it first got put in there. When you sell it, do you put all $20K from that stock sale into whatever new stock comes in, or do spread it out in chunks of $4K into all of the latest top 5?

[dieudonnezonou]

i assume you started with random assumption of top 5, can you backtest the optimal number of top compagnies to use for this strategy?