Saturday, November 14, 2009

Investing philosophy of Ocean Portfolio

The investing philosophy of my fund is based on the trend following technique using technical indicators with discipline. The portfolio is to focus only on ETFs trading to seek its potential growth and profits as long as the selected fund remains in its trending direction.

When the trend reverses and reaches its predetermined criteria, the full or scale-out of the holding would be liquidated for either taking profits or reducing losses. Using this strategy may not achieve the maximum potential profits, but it protects the extended loss of the capital should the trending patterns reverse.

The major technical indicator for trend following is the Moving Average indicator and it is widely used by many successful investors. My ETF selection is divided in the following areas: Domestic, International, Emerging markets, Country specific and Sectors. Position can be either Long or Short (inverse) depends on the trend of the market. ETF that has at least over 1 million shares of average daily trading volume is considered for trading because liquidity is the key for market investment. The holding period of each fund can be days, weeks or months as long as the trending pattern holds.

The choice of investing in the ETFs using the trend following technique is to maintain the steady growth of the investment capital while keeping the loss to minimum and reducing the management expenses comparing to mutual funds. 

One of the successful investment publication "The Mutual Fund Strategist" by Holly Hooper is using the similar moving average technique to advice its clients as it mentioned in her sample newsletter. 

The Ivy Portfolio by Mebane Faber and his research paper also identified the moving average indicator can be a strategy of choice for discipline investors. 

The ETF Trend Following Playbook by Tom Lydon also emphasized the similar technique and achieved great result.

The Simple Hedge Strategy created by Ulli Niemann who used his proprietary Trend Tracking Index (TTI) along with simple moving average and trend line resulted in great success.

Dick Fabian's 39-week moving average technique described from his book "The Mutual Fund Wealth Builder" which had a high percentage of making profits in a trending market. My Simple Moving Average Strategy of 39-week MA is based on his finding and I added the MA-4 cross-over for additional confirmation signal. 

For some aggressive and swing position plays, daily and minute charts using these simply moving averages may be considered.

Two important rules, DISCIPLINE and TIME are the keys. Given a strategy that seems to be working, we need to adhere to it and provided ample of time to let it run and profits may come at the end.


  1. I hadn't known about some of the trend trackers you mention. I'll check them out. The favorite I'm aware of is Ullie G. Niemann. He didn't make your list of trend trackers. His methods and data are freely shared have been very helpful to my investing.

  2. ks,

    I didn't include Ullie because he used his proprietary Trend Tracking Index (TTI) along with moving average and trend line. After a second thought, I added his strategy as a honorable mention since I also found his trend following method to be very helpful.


  3. i ve tested your strategy on sp500 from 1950 to today. the overallreturn is 3400 %.cross of MA-4 and MA-39

    The mebane faber method gives 5800 %.

    But maybe on another index results are inversed.

    i didnt find something beter than mebane faber for now. still searching