Maximizing gains through stock investing
Our goal is to maximize the long-term wealth of our clients. Over the long run, stocks have outperformed nearly all other types of investments. Our strategy, therefore, is to manage a portfolio of stocks for our clients. In order to contain the risk to which we expose our clients, we hold only long positions in stocks. We do not sell stocks short, nor do we trade in derivatives.
Researching disciplined strategies for portfolio management
Theories abound on methods for picking stocks and managing portfolios, yet unless we have the means to test these theories, they remain little more than speculation. Quantitative investing provides an unemotional and disciplined strategy for managing stock portfolios. It also gives us a strategy that we can test objectively over past data. At DIA, we have developed our portfolio management strategy using analysis based on our own research, algorithms, formulas, and coefficients and tested that strategy on over ten years of detailed market data using historical computer trading simulations over millions of portfolios.
Putting the results to work
We buy mid- to large-cap stocks that have a strong trading volume, healthy earnings, and positive price momentum. This results in a mix of growth and value stocks. The stocks we own can come from all market sectors with the concentration varying with market conditions. We hold between ten and twenty stocks per portfolio with never more than 20% of the total portfolio value in any one stock. Our holding periods average several months though are occasionally as short as a few weeks. We are not day traders.
Understanding and accepting the risks
Our focus on aggressive growth stocks can result in a high volatility. Consequently, our client focus should be on long term capital growth over five or more years and not merely on short term income. We can, however, easily adapt our research techniques to derive trading models customized to a variety of client needs, such as the greater diversification and stability required for mutual funds or trusts.
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