No. of Recommendations: 3
Jim, are there any screens that are very safe and work like RSP or even better? My favourite approach along those lines is outlined here.
http://www.datahelper.com/mi/search.phtml?nofool=y..."This is a retirement portfolio kind of screen: LargeCapCash.
The goal is a screen which is as safe as the S&P 500 but with the hope of somewhat higher returns over the long run.
This specific screen has low turnover, lower concentration risk than the S&P with largest position at 2.5% of portfolio, probably significantly lower company specific risk because of requirement of very strong balance sheet and profitability. And a very strong large cap bias...",Several slight variants are discussed in the thread, but the two in the first post are just fine.
One variant is just a bunch of large cap stocks, the second variant is the same but just insists that all picks pay a dividend.
Both variants have beat the market in the first 3 1/3 years after that post when used as suggested. The version requiring a dividend has done a bit better, consistent with the backtest result. That one has beat the S&P in all the rolling 2-year periods since the post so far. (and in 95% of rolling-2-year periods in the last 20 years, by 5.0%/year overall after trading costs, if backtests have any value)
The work you'd have to do:
Buy equal weight 40 stocks, hold for 2 months, calculate the fresh picks and replace any stocks no longer among the top 45 with the highest ranked ones you don't already own. Rebalance the whole thing to equal weight once a year.
Reality will never be as good as a backtest, but I suspect that over the long run you wouldn't do
worse than with the index because it's all large cap stocks with lots of cash and high profitability. The short term correlation is pretty high. The correlation coefficient is about 96% at the one month interval.
Jim
