Backtesting Technical Analysis
Wednesday, January 30, 2008
OK, so I've found an easy to use program to back test the Rule #1 TA rules. It is called Seer. A fully functional 30 day eval can be downloaded here. Here is my XML file which contains the rules and a database of somewhat rule1 stocks to run it on. I have found with this database that a buy and hold strategy will yield returns of ~20% with this portfolio while using the TA tools will yield ~14%. The software runs through your symbols alphabetically and does not look for selling at a specific target price or starting your buy run at a particular MOS price. It's purely TA. So, is it worth the 6% annualized return to protect your investments? That depends on how well you know your businesses. It also depends on the risk that you want to maintain as an individual investor. If anyone can utilize the work presented here and find any more meaningful data, please post your findings here. I have been skeptical of following the mob, especially in this market where there are many bargains. However, this may just be my ignorance speaking.
But remember, through it all, I'm looking out for you:
The Little Guy
Posted byLookingOutForTheLittleGuy at 2:45 AM
Wednesday, January 16, 2008
It's been while since my last post... You know, cold season, the holidays, etc....
I hope that your new year is treating you well and that the advice I give here treats your pocket book even better!
If you have bought a home in the last 3 years now is the time to refinance. Omega Financial Services is offering great rates on a 30 year fixed 15 year fixed rate mortgages. I was able to save 3/4 of a point with my refinance. These are true no cost loans. The only thing you need to bring to closing is the money to start your new escrow account. Your old bank will then refund you a substantial amount of that about 1 month after you close on your new loan.
I have no affiliation with Omega Financial Services. I just find them to be a great, honest company to do business with. If you call them, ask for Mr. Loren Frey.
Have fun and remember, that I'm looking out for you
The Little Guy
Posted byLookingOutForTheLittleGuy at 8:23 AM
Friday, November 30, 2007
If you have multiple services from Verizon, call them and ask that all of your services be on 1 bill. Make sure they give you the $9.99 discount per month.
In addition, if you have celluar service and land line through Verizon, ask them about the free calls to home from your primary cell for signing up for the 1 bill promotion.
Looking Out For You,
The Little Guy ;)
Posted byLookingOutForTheLittleGuy at 12:37 PM
Wednesday, November 28, 2007
While perusing the Berkshire Hathaway website, I read a message from Warren Buffet with regards to GEICO. I was wondering how much I could really save by switching to GEICO. I don't want this to sound like a commercial, but I did save a bunch. I ended up saving just about 50% of my bill from switching to GEICO. I told a friend of mine how much I saved and he called them too. He ended up saving 50%as well. It's just like getting a raise!
So it's worth checking out....
Looking Out for You,
The Little Guy
Posted byLookingOutForTheLittleGuy at 5:49 AM
Technical Analysis and Charting
Tuesday, November 27, 2007
To be honest, I'm not totally sure that I'm sold on technical analysis. It's been an OK tool so far and I still look at my charts everyday. Warren Buffet has said that he knew technical analysis was useless when he turned the charts upside down and saw the same thing. Phil Town uses technical analysis as a sort of insurance against a market collapse. Basically, he wants to be able to get his money out of stocks and into T-Bills before the big-guys have time to move all of their money out of stocks. I'm going to keep at it and maybe sign up for an Ameritrade account where you can backtest your strategies against 10 years of data. Anyway, Phil Town reccomends investtools. However, I'm definatley NOT willing to shell out $600 on a tool just to get me some arrows on when to buy and sell.
So, If you are interested in technical analysis, the best charts that I have found are as follows in this order:
Prophet Charts: 1 watchlist and portfolio are free! Great tools and charting options. View multiple studies on one chart. They give you the ability to annotate your charts with trendlines and save chart styles and drawing options.
MSN Money: Nice charts. Settings arent saved from computer to computer. You can only view the price line and another tool at the same time.
Yahoo Charts. Nice interactive chart. However, they dont give intra-day trading information.
After you read Phil Town's blog and book you will have a solid understanding of how to use the "3 tools" or his version of technical analysis. Those tools are:
- Moving Average (MA , 10 and 30 day exponential are my preferred MA)
- Moving Average Convergence/Divergence (MACD, 8,17,9)
- Slow Stochastic (14,5)
- Volume. Even though it's not an official tool, if you see the volume double or more in a day you know something big is going to happen to the price
So, take what you want from technical analysis. Let us know how it works for you.
Looking out for you,
The Little Guy
Posted byLookingOutForTheLittleGuy at 1:37 PM
My first foray into investing started shortly after I started my first full time job after college. A co-worker who was further along in life with a wife and kids pointed me towards the motley fool. After reading their first book, I ended up doing what many novice investors do; I invested in Vanguard's S&P 500 Index fund. Through it all, this investment didn't do as well as I had hoped ( more on this later ).
A few years later after I was married, my wife and I read David Bach's Smart Couples Finish Rich. It was a very good book and gives some very good advice. My only gripe is that he strongly urges you to work with a financial advisor to diversify your portfolio instead of going at it on your own ( more on this later too! ).
A few months back, my wife and I were relaxing after we had put the kids to bed and started watching a program on CNBC called the Millionaire Inside . On this program, we saw a host of self made millionaires. One of them was David Bach and another, very interesting guy was Phil Town. He started us on path to investment freedom. We bought his book, read it from cover to cover in a few days after we put the kids down for bed and started our investing future. Phil discusses indexing and financial advisors quite a bit in his book in a manner that is very easy to understand even for investing novices. However, after putting the book to practice, his slogan of 15 minutes or less a week ended up being quite a bit more. I think that once you have an established watch list, you can spend 15 minutes or less a week but building that watch list may take many hours.
After reading this book, I wanted to read more on the subject of investing and really dig into the roots. Much in a way a novice blues musician would listen to Muddy Waters after becoming a fan of Eric Clapton. I found a copy of Seth Klarman's Margin of Safety at a local library as it is a very expensive book. It gave me some invaluable insights into investing. I highly recommend tracking down a copy. The most notable insight was not in his words but in Warren Buffett's. They were "Wait for the pitch". Basically have infinite patience when waiting for your business to hit it's margin of safety price. When you do, your reward will be plentiful.
I also saw a program on CNBC where they interviewed and discussed Warren Buffet. Warren Buffet is really the master of investing. He's a brilliant man that I cannot say enough about. I would definitely recommend getting a copy of Cunningham's compilation of Buffett essays. These are written with such clarity that you will want to read the book all night long.
Last but not least, when I get the time, I will read the book by the man who started it all. Benjamin Graham , author of the "Intelligent Investor", was Warren Buffet's mentor along with being the father of value investing. Without his brilliance we would not have any of the texts that I speak of in this post.
After having these books in my arsenal, I devised some spreadsheets to help me with the job of placing valuations on companies using Phil Town and Benjamin Graham's techniques.
To use these spreadsheets, you will need a free account with Morningstar . After you have your account, you'll need to look at the balance sheet of any company. I haven't found a way around this yet.
There is a growth rate override cell called my rate in which you can specify a growth rate. The manual sheet clears this rate on every update where the automatic sheet does not.
You can either use the spreadsheet with automatic web query updates or use a manual macro to update the values in the sheets. These are free to use. However, please use at your own discretion as there may be errors in the sheet. They are only meant as a guide and not a replacement for good judgement and adequate research.
Here they are:
Auto Valuation Sheet
Manual Valuation Sheet
If you have questions please feel free to post comments as I will be more than happy to assist you.
Thanks and remember that I'm looking out for you, the little guy!
Posted byLookingOutForTheLittleGuy at 7:52 AM
Wednesday, November 21, 2007
Hi there. I'm one of the "little guys". I'm a middle-class software engineer that's trying to make the most of my money via saving and investing in order to do what I like to do the most, i.e., spending time with my wife and kids.
I'm hoping to pass on the gems that I've learned through reading and experience and pass them on to you, the reader, in a simple manner with links to all relevant information. I'll also pass on any tools that I have found to make the process easier. Last, but surely not least, I'll also tell you about easy ways to save money since a penny saved is defiantly a penny earned in my book.
Any way that I can find to save or make money, I'll tell you. I'll also fill you in on the effort involved since "time" is also money.
So, come back and come back often. I've found quite a few very helpful resources over the years and I hope to share them with all of you.
Looking out for you,
the little guy
Posted byLookingOutForTheLittleGuy at 1:00 PM