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FYI: In my 36 Obvious Investment Truths, number 24 stated: 24. Most backtests work better on a spreadsheet than in the real world because of competition, taxes, transaction costs and the fact that you can’t backtest your emotions. Regards, Ted http://awealthofcommonsense.com/2017/09/the-front-test/
There are at least a few people here who seem to follow rules-based strategies and be quite happy with them. It's been quite a while since some have posted. In some cases I think the comfort comes because the goal isn't always to beat the market. In others it seems like a lot of Ben's points might apply.
I have 2 rules of general rules of thumb that I'd welcome comments about. First, anyone who is sharing their rules-based strategy that's designed to beat the market is high risk to follow for the very reasons the article points out but also because if the idea was so good they wouldn't be sharing, they'd be getting rich and telling no one.
The second rule is that any system not designed to beat the market could be really interesting if my goals line up with the goals of the system and the system has done better historically than I've done. That makes me want to study, ask questions and consider whether there's an opportunity.
When I was younger I always wanted to believe it was possible to do what this article is warning against but years of experience has convinced me I won't be the one who discovers it.
Comments
I have 2 rules of general rules of thumb that I'd welcome comments about. First, anyone who is sharing their rules-based strategy that's designed to beat the market is high risk to follow for the very reasons the article points out but also because if the idea was so good they wouldn't be sharing, they'd be getting rich and telling no one.
The second rule is that any system not designed to beat the market could be really interesting if my goals line up with the goals of the system and the system has done better historically than I've done. That makes me want to study, ask questions and consider whether there's an opportunity.
When I was younger I always wanted to believe it was possible to do what this article is warning against but years of experience has convinced me I won't be the one who discovers it.