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Posts: 116

Joined: 6/16/2004
Location: Sydney, NSW, Australia

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Subject : RE: Most Useful PortSim-Research Alloc Method
Posted : 9/2/2021 2:05 PM
Post #48258 - In reply to #45291

Howzit Jim?

An amazing thread with great points of view from many experts

While I applaud the intention to get a more flexible/meaningful allocation methodology, I believe the Fixed $ allocation is equally flawed (maybe not equally but substantially flawed anyway) and this relates to inflation/power of $/$ value

What do I mean? Let me explain using an example. assuming your parameters of 7% on a 100k account, you could have bought ±250 AAPL shares 20 years ago, while today you wouldn't even be able to afford 50. This is anything but a level playing field, statistically each trade doesn't have the same influence. So IMHO we're comparing apples (pun intended) with oranges i.e. Fixed $ allocation is equally flawed. Perhaps in a flat market over 20 years you could make a case …

This does not detract from your point that we need a more flexible/meaningful allocation methodology, quite the contrary, it reinforces it! The reality is that we do have cash accounts associated with our trading accounts and and transfer funds between the two so it would be a welcome addition to add to the PortSim e.g. withdraw 50% of profits/year but I digress

BTW I find it interesting that we talk about seeding a trading account with $100k 20 years ago, personally speaking I would have dreamt of having an account of that size, in reality it would have been more like $5k-$10k so for my testing that would be a more realistic starting point which would also limit the compounding effect while magnifying the real cost of trading on a small account but also lends itself more to a % of Equity allocation methodology

Keep the good stuff coming Jim, I think we all learn something new from you every week if not day


Subject : RE: Most Useful PortSim-Research Alloc Method
Posted : 8/30/2018 8:57 AM
Post #45291 - In reply to #45289

For the purposes of *comparing the relative merits* of different strategies or methods, a fixed dollars trade size is by far the best approach - it evens the playing field over time and gives each trade statistically the same influence as every other trade during the test period.

Deleting message 48258 : RE: Most Useful PortSim-Research Alloc Method

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