There are many quantitative investment strategies, and all of them have great returns.
BUT your goal here is not to choose the investment strategy with the highest return.
Your goal is to choose the investment strategy that matches your investment style. This will also be the strategy you feel most comfortable with and lets you to sleep well.
The best investment strategy you will ever find is not the one with:
- the highest return,
- the lowest Sharpe ratio
- the lowest maximum draw-down
- the strategy currently beating the market
- the strategy that worked best in the last bear market
Your best investment strategy is simply:
- The strategy you can stick with in good times and bad.
- The strategy that lets you sleep comfortably at night, every night.
- It’s the strategy that fits your nature and that you are comfortable with, that implies that you should be able to understand the strategy and each single investment decision.The reason you must be comfortable with your investment strategy is because it WILL underperform the market some of the time – this is something that happens to ALL the best investment strategies.
And, sometimes this can go on for a few years.
The thing is – only if you are comfortable with your strategy will you be able to stick with it over these bad times, and that is what you must do.