Capital Allocation

[Mikey12345]

Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

 

[scose-no-doubt]

0

 

[pboyles]

Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

If you have any sense at all you wont even think about it. There is nothing that works as simply as you suggest, you'll end up losing more than you make.

 

[ThomasJ02]

Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

The classic answer is to use the Kelly Criterion (google it if you haven't heard of it before). However, to use this, you'll have to be able to quantify your edge. To take your example, what does the expected return and standard deviation of your investment look like when rsi(14)<30?
This might be hard, but on the other hand if you can't quantify your edge, you probably shouldn't be trading.

 

[N Rothschild]

invest a million dollars on what the rsi is doing? wow.

 

[JDW1411]

Ed Seykota has done some great work in this field.