And if you discover you're better than an index, you know your time was well spent (although luck may factor into both scenarios).
Either way, quantify your effort. You're already likely putting in a lot of time to pick the stocks. An incremental bit more will help you track it.
If you hand pick stocks, you will lose. A simple index fund will destroy you over, say, 10 years. I'm happy to back up that claim with cash if you will make your picks public. $1,000 to the charity of your choice.
* Where's the best place to get data for testing purposes?
*What kind of trades do you do? Is it mostly buying and selling actual stocks, or do you go after more complicated trades like shorts/puts/options?
If you open and fund an account at tradier.com they give you access to a REST API that includes some good stuff. I also pay $50/mo for some additional data from ycharts.com. But you can also use some free libraries that pull from yahoo and they sorta work.
>*What kind of trades do you do? Is it mostly buying and selling actual stocks, or do you go after more complicated trades like shorts/puts/options?
My algorithms are long-only and I buy stocks and hold them for at least one year. If the algorithm could exceed the high cost of short-term capital gains, I would hold for a shorter period.
You could also try quantopian.com for some super short term trading. I personally think that is a poor use of time.
I REALLY wish there was some place I could enter competitions and make my trades public. I'm using motifinvesting.com for now but would enter trades at other places if I could.
I played around with instavest.com (a YC company) which was promising for a while but it stopped working and I suspect they are on life support or something.
I'm looking to get my feet wet in quant stuff, but the high price is scaring me off. Right now I'm running simple momentum models on macro index ETFs using Yahoo data (monthly trades).
For income, I put a portion into high-dividend stocks, and either draw the dividend or trade them away pre-dividend for more than the dividend would have paid... re-buying later after the price drops post-dividend.
For short-term money trades, I look for depressed stocks with what I call rebound-potential... e.g. something like bad news or earnings miss can depress a stock 5-20% depending on the day/mood of the market, I buy and hold some of these I think have a potential rebound in a moderately short-term ( say a week or 2 ), for a modest profit.
The main thing is to stay diversified, and always keep some cash available to buy a potential dip, you cannot have all of your money in 2 or 3 stocks and expect to do well unless you're extremely lucky, and just like in Las Vegas, luck doesn't always go your way. The more and different stocks that you hold, the easier it is to sell a winner, and re-invest that profit in the next.
Also, you need to be able to hold through the short-term market flux, and not sell out of fear... i.e. kim jong shooting fireworks over Japan can shake the market temporarily, you need to be able to hold steady until the market recovers, and even better, buy the dip.
Doing this right is incredibly time consuming, and I don't do it with the bulk of my investments. I will usually focus on three companies max, because that's about all the work I can handle. I've been much more successful since I started taking this approach, and the percentage returns are much better than what I get from my investments in index funds, but the amount gained comes out to about the same because of how I allocate. Trading is only as risky as you make it, but a lot of people will get sucked into the allure of outsized gains. Use all the tools and financial instruments at your disposal to protect your investments, and don't get lazy about managing them.
Some companies do partnership on research with universities. So you can easily network and hear about their public projects.
But be very careful if you intent to create a full portfolio with all companies in the same place, it's very risky (I do it because Switzerland is a small country)
What I look for is:
1. Small companies (none of the serious big guys look at small companies so you have a chance);
2. and are doing some real and valuable;
3. and are being ignored because the past management were terrible, but where the current management has nothing to do with the old management (reverse takeover, backdoor listings, etc).
On point 3 I am amazed how many investors treat companies like people. They will continue to punish a company for the sins of the past even when everyone involved is different.
I am sure you understand that I don’t want to get into specifics in a public forum.
An example of a company that fits my criteria (and which I have invested in) is the ASX listed ruby miner Mustang Resources .
If you insist, from what I've read algorithmic trading, small companies (not necessarily startups) and companies that have had significant changes, e.g. new management seem to be popular.
idea is to preserve capital during extended downturns.
been in the index side since 2015 except for a few months during brexit.
I've done the following ICOs: filecoin, saltlending, latoken.com, cobinhood.com, polychain
It is HARD to find info about actually legitimate ICO companies.
Draw a line on what you think they're worth. I detailed this in the sibling comment. If they're lower than this line, they're undervalued.
But don't watch prices. Watch the news. I say don't buy them too early because stock prices can take years to correct, especially for low profile companies.
A good catalyst: Company wins a project, key board member becomes more powerful (maybe his daddy became deputy prime minister), new market opens up for them, rival dies, acquisitions and mergers.
Bad catalysts: Scandals, accidents, some prominent individual attacks their credibility on media.
I find business news to be the best source of catalysts.
There are tools used to follow and even highlight which stocks are going up. The traders will be faster than you unless you do it full time. But you can still be faster than the rest of world.
It sometimes helps to go at it from an untrained perspective and make your own estimates. Look at assets, cash flow, cash in the bank. Opportunities, market size. Yes, this does take a lot of work, but you are literally being an investor here. It's good to be an expert in the field you're investing in.
Draw a line. Find out where the spikes in the data are coming from: are they catalysts or just hype? I've seen some odd things, like when a certain party wins the election, shares of the prime minister's relatives go up.
The line would rarely go "hockey stick" when these things happen. Often they're more of an S-Curve. If they're undervalued, it's just correcting, meaning that the real line is a lot steeper.
Don't look too closely at profits. A lot of companies reinvest in themselves, partly to minimize tax. Companies that offer high dividends are often committed to slow growth.