Unlocking the Benefits of Systematic Investing

systematic investing Jan 11, 2023
quantitative investing


Introduction: When it comes to investing, many individuals feel intimidated or uncertain, especially when they're starting out. However, just as there are tried and true strategies you can use to help make your finances successful, there are also strategies you can use to make your investments successful. One such approach is systematic, rules-based investing. Let's take a look at the advantages of this type of investment strategy.

What is Systematic Investing?

Rules-based investing, also known as systematic investing, involves creating a set of rules or a systematic process to guide investment decisions. Some advantages of rules-based investing include:

  1. Objectivity: By following a set of pre-determined rules, investors can avoid emotional biases and impulses that can cloud their judgment.

  2. Repeatability: Rules-based systems can be automated, which allows for repeatability and consistency in investment decisions.

  3. Transparency: Rules-based systems are often transparent, which allows investors to understand and evaluate the decision-making process.

  4. Backtesting: It's possible to backtest rules-based systems using historical data, which allows investors to evaluate the potential performance of the system before actually using it.

  5. Risk management: Rules-based systems can be designed to include risk management rules, which can help investors manage their exposure to risk.

Why Should I Use Systematic Investing?

One of the main benefits of using a systematic investment strategy is that it helps reduce risk by removing emotion from the equation. Many traders get emotional when faced with certain market conditions, leading them to make decisions based on fear or greed rather than logic and analysis. By following predetermined rules, traders can avoid making costly mistakes due to emotions and instead focus on making sound decisions based on data-driven analysis.

Additionally, systematic investing can help traders identify profitable trades more quickly since they don't have to manually scan through all available data points in order to make an informed decision.

Lastly, by relying on predetermined rules for buying and selling assets, traders are able to free up time that would otherwise be spent monitoring market conditions and researching potential trades.

How Do I Implement Systematic Investing?

The first step in implementing a systematic investment strategy is to determine which types of assets you'd like to trade and how much capital you want to allocate for each trade. Once this has been determined, it's important to develop a set of rules that must be met before any action is taken in the market – such as what price range constitutes a buy signal or when should stop losses be activated.

It's also important for traders who implement this type of strategy to maintain flexibility so that they can adjust their rules if necessary in order to adapt to changing market conditions. Lastly, it's vital for traders who are using this type of strategy regularly review their results so that they can ensure their methods remain effective over time.

The good news for investors is that the founder of Drawbridge Strategies, Tim Fortier, has been building and managing rules-based strategies for over two decades. Drawbridge provides investors with a variety of "done for you" models that have been tested in the trenches and traded with real money.  

Every model is reviewed and updated at each rebalance period. All an investor has to do is follow the simple rebalance instructions each time a model is updated. 


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