In this article I want to break down various investment strategies. The I Know First Algorithm generates a forecast table with three bits of information, the ticker, the signal, and the predictability. For simplification, let us assume the signal is the prospective profit indicator, while the predictability is the risk indicator. Our goal (as the goal of any investor should be) is to create a portfolio with the maximum potential return (larger signal) and minimum risk (larger predictability). For more information on how to read the ticker, signal, and predictability please view this page
. Different investors follow various strategies, as their objectives and incentives slightly vary. This analysis includes four strategies:
- Simple allocation according signal strength.
- Top Stock
- Top Three
- Top Ten
- Weighted allocation according to signal strength.
- Weighted allocation according to signal predictability.
- Weighted allocation according to signal strength and predictability.