(this post was originally published in the newsletter no.1 in mid January. Probably I will not publish any performance related data in the future, mainly beacause r.Virgeel is not a trading system and also because real performance depends on a lot of factors, depending on your location, tax burden, investment strategy, etc. Anyway, the first two years of activity are here summerized, to show how the the robo advisor is performing in the real world)
I’ve always been reticent to publish the performance of the Position trading system: I’ve even dismissed the record table for the subscribers, without any complaint from them. It should be complex to explain why, it’s something intuitive, but it is related to my distrust in backtesting. First, I’ve always tested forward, not behind. It’s slow, for sure. The model, or as I call it now: r.Virgeel has taken shape during four years and is performing well. It is still under development: new ideas are passing as clouds at the moment. r.Virgeel correlates dozens and dozens of markets and is trained to be a prudent trader, preferring the long term run to the frequent short term trading. r.Virgeel warned us that the market was heading to 2730 many months before, and, honestly, I couldn’t believe it. r.Virgeel is trained to take the best position available in any single moment and it knows the market since a long time. It is not biased, it is responsive and adaptive, it’s huge (the brain is now around 15-17 Millions of neurons). It’s not something that you can backtest, you know (even if it is remotely possible), and I cannot guarantee that at a certain point it doesn’t go completely nuts. At the moment, r,Virgeel is well fit.
Anyway, I understand well that performance is a good starting indicator for evaluating any investment strategy: we have a bottom line and our mental model is arranged to appreciate rankings.
So, this is the update to the daily Position performance: the system started it’s first recorded operation (long) on Feb. 12, 2016 with the index at 1857. Two years may seem a short time and it is, but, as I wrote before, r.Virgeel is unbiased, it doesn’t take in account its previous evaluations. Since inception the Position system has completed 14 positions, 12 long and 2 shorts. Holding the position has lasted from 6 to 74 days, with an average around 37 days. Three positions were negative, respectively -0.28%, -0.84% and -0.04%. The total gain sums up to 823 points, or 44.32% with an annualized rate of 23.14%. A buy and hold strategy should have won, as the S&P 500 has gained 831 points in the same time window. This is mainly due to the fact that the model is trained to be conservative: it exits the market when the short term profits are too risky and recent market conditions made it difficult to re-enter at a lower price.
All calculations are made on gross trading the index value, without taking into account transaction costs and fiscal payments. A reasonable slippage is applied. All transaction are evaluated at the opening of the following day, after signal generation. Personally, I manage my whole personal capital under r.Virgeel advisory. Only, I select the ETFs in a range of preferred sectors.