Author Topic: Number of positions in an Equal Weighted Portfolio - Research findings  (Read 1506 times)

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Offline Dave McCulloch

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Dear Members,

After some extensive research, Gary presented his findings of the impact of having different numbers of positions in an Equal Weighted Stocks Portfolio.

The research has highlighted the positive impact that increasing the number of positions in an equal weighted portfolio can have, by reducing draw down without significantly impacting the Compounded annual return rates.

What does this really mean and why is it important to know?

Increasing the number of positions that a  portfolio can have means that each position size will become smaller. Because each position size is smaller it means that the adverse effect a losing trade has on the portfolios performance is diminished or reduced, and therefore leads to lower equity draw down.

It was expected that by increasing the number of positions that it could also inhibit portfolio performance due to insufficient opportunity to expose capital to the market.

The good news is that this is not actually the case as the performance impact is relatively small. So in effect, less bumps (draw down) and little change in longer term outperformance. Especially for U.S. Stock.

I strongly recommend that you watch the recording of  this 17th May eUGM, which is housed in the Share Wealth Systems Education Centre, for a full synopsis.

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Based on the findings of the research, we will be making adjustments to the SWS equal weighted stocks public portfolios for both the USA and ASX markets.