Systematic Investment Strategies

Systematic Investment Strategies | Backtest And Examples

Are you tired of constantly monitoring the stock market and making emotional decisions that can hurt your portfolio’s performance? If so, then a quantitative investment strategy may be the solution for you. With the help of investment experts, this investment strategy uses a systematic investment process to ensure that your portfolio is optimized for maximum returns.

Systematic investing is a quantitative strategy for investing in financial markets that involves making regular investments in portfolios of products such as stocks or bonds, with the goal of achieving long-term objectives through strategic asset allocation. By using a systematic approach to trading, investors can avoid emotional decisions and improve their overall performance.

One of the key benefits of systematic investing as an investment strategy is its ability to provide a steady stream of income over time through income investing, which can help investors achieve their investment objectives and investment plans. This makes it an attractive option for both individual and average investors who are looking to build their wealth over time and achieve a consistent investment return.

But what does it mean to have an “investment strategy”? Essentially, it means that investors have investment plans in place for how they will invest their money over time. They make regular contributions to their portfolio, regardless of short-term market fluctuations, with the goal of achieving long-term growth and meeting their investment objectives. Additionally, many investors are now turning to sustainable investing, where they consider environmental, social, and governance factors when making investment decisions.

When comparing systematic investing to other investment strategies, such as active trading or buy-and-hold, it’s important to consider your own investment goals and risk tolerance. However, many investors find that systematic investing, which includes strategic asset allocation and exchange traded funds, provides a low-cost alternative to individual stocks that can help them achieve their financial objectives through diversified portfolios without requiring constant monitoring or intervention.

So why does systematic investing begin with systematic saving? For the average investor, setting aside a portion of your income each month towards your investments is crucial for strategic asset allocation. By consistently building your portfolios over time, you can reduce the impact of short-term market fluctuations on your overall portfolio performance. This steady approach is especially important for the individual investor who wants to grow their wealth steadily.

List of Systematic Investment Strategies (Backtest)

On this page, we have compiled all the backtested systematic trading strategies we have published since our start in 2012 (plus relevant trading strategy articles). The page contains 100+ trading strategies plus articles about indicators and trading strategy-specific articles. We are confident you find something interesting for you among all these articles.

Related reading: Systematic Trading

Different Approaches and Frameworks for Building Systematic Investment Strategies

There are four main investment strategies that investors can choose from: passive, quantitative, trading, and active. Each approach has its own unique features and benefits that cater to different types of investors. Additionally, some investors may prefer discretionary investing, which allows for more individual decision-making in constructing portfolios. Sustainable investing has also gained popularity, as investors seek to align their investments with their values and support environmentally and socially responsible companies. Strategic asset allocation is another important consideration for investors, as it involves determining the optimal mix of assets to achieve long-term financial goals.

Passive Investment Approach

The passive investment approach, which involves strategic asset allocation, is a sustainable investing strategy that focuses on buying and holding a diversified portfolio of securities through etfs. This long-term investment approach is based on the belief that the market will eventually rise over time, so investors should use discretionary investing to simply hold onto their investments until they reach their financial goals.

Passive investing, a popular investment strategy, is often associated with index funds or exchange-traded funds (ETFs), which track a specific market index such as the S&P 500. These systematic investment approaches offer low fees and diversification across multiple companies or industries, making them an ideal choice for both novice investors and investment experts alike. As a systematic investor, it’s important to consider passive investing as a viable option for building a diversified portfolio.

Related reading: Frank Armstrong Ideal Index Portfolio

Quantitative Investment Approach

Quantitative investing, also known as systematic strategies, involves using data analysis and mathematical models to make investment decisions. This approach relies heavily on computer algorithms to identify patterns in the market and determine when to buy or sell securities, making it a preferred choice of systematic investors. However, discretionary investors may opt for strategic asset allocation instead.

One popular investment strategy is factor-based investing, which is a systematic investment approach that focuses on identifying specific factors such as value or momentum that have historically led to higher returns. By analyzing these factors across various markets, investment experts can build portfolios that aim to outperform traditional benchmarks, while aligning with their investment objectives.

Trading Strategies

Investment strategies involve actively buying and selling securities in an attempt to generate short-term profits. Unlike passive or quantitative approaches, investment strategies require constant monitoring of the market and quick decision-making skills. Investment objectives should be carefully considered before implementing a strategy, and seeking advice from investment experts can be beneficial for a systematic investor.

There are many different types of investment strategies, including day trading, swing trading, and position trading. Day traders typically buy and sell securities within one day while swing traders hold positions for several days or weeks, depending on market cycles. Position traders may hold positions for months or even years before selling, based on their investment objectives and strategic asset allocation.

Active Investment Approach

Active investing involves making investment decisions based on research and analysis rather than relying solely on algorithms or market trends. This strategic asset allocation approach requires more time commitment from investors as they need to stay up-to-date on market news and company performance, while implementing an effective strategy to hold etfs.

Active investors often use a specific investment strategy that aligns with their investment objectives. This may include strategic asset allocation and investing in individual stocks or sectors rather than broad-based index funds or ETFs. While this approach has the potential for higher returns, it also carries more risk and requires a deeper understanding of the market and individual companies.

Related Reading: Discretionary vs Systematic Trading

Framework for Building Systematic Investment Strategies

Regardless of the investment approach, building a systematic investment strategy involves several key steps, including strategic asset allocation, which is the process of diversifying capital across different asset classes based on market cycles to maximize total returns.

Analysis and Insights

The first step is to analyze data and gain insights into the market or specific securities, considering your investment strategy and investment objectives. This may involve analyzing financial statements, economic indicators, or other relevant data sources to determine the appropriate asset allocation. Additionally, tracking performance is crucial to evaluate the effectiveness of your investment strategy.

Informed Decisions

Based on this analysis, systematic investing with BlackRock can help investors make informed decisions about which securities to buy or sell. This strategy should be based on a clear investment thesis that outlines the expected total returns and potential risks, while also considering the past performance of the securities.

Algorithms and Models

For quantitative investment strategy approaches, algorithms and models are used to automate these decisions based on pre-determined rules. Investors must carefully test these models before implementing them in order to ensure they are effective at generating returns and improving performance. It is also important for investors to regularly monitor their investments and hold onto them for the long term. They can do this by checking their portfolio’s performance on a website and making adjustments as necessary.

Demo Portfolio Testing

Before investing real money, many investors create a demo portfolio to test different models and tactical elements. This allows them to see how their investments would perform under different market conditions without risking actual capital. To improve the performance of their investments, they can try different strategies that are available on websites like etfoptimize.

Once an investor has developed their systematic investment strategy, they must continuously monitor its performance and adjust as necessary based on changes in the market or other factors. This can be done by regularly checking the return on investment over the years and analyzing the data on a dedicated website.

The Importance of Following Rules in Systematic Investing

Eliminating Behavioral Biases and Emotional Decision Making

One of the most significant benefits of following a systematic investing strategy is that it helps improve performance and eliminate behavioral biases and emotional decision making. Investors often make decisions based on emotions rather than logic, which can lead to poor investment choices and lower returns over the years. By creating a well-defined ruleset for your investments, you can remove the influence of emotions from your decision-making process and improve your website’s investment performance.

When you have a set of rules to follow, it becomes easier to stick with your investment strategy even during times of market volatility or uncertainty. You won’t be tempted to make impulsive decisions based on fear or greed because you’ll have a clear plan in place that takes those factors into account. This can help you avoid costly mistakes that could derail your long-term investment goals. Additionally, regularly checking the performance and return of your ETF investments through a reliable website can help you make informed decisions and adjust your strategy accordingly.

Ensuring Accuracy and Consistency in Investment Decisions

Another benefit of following rules in systematic investing is that it ensures accuracy and consistency in your investment decisions, leading to better performance expectations over the year. When you have a well-defined strategy, you can be confident that every decision you make aligns with your overall goals and objectives, even when investing in ETFs. This leads to better returns and can be easily tracked through a website.

Having a set of rules also makes it easier to track your performance over time. You can compare your return against benchmarks like Morningstar risk measures to see how well your ETF strategy is performing relative to other options available in the market. By keeping track of these metrics on a website, you’ll have a better understanding of whether or not your investment approach is working as intended.

Taking Responsibility for Your Investments

Ultimately, following a systematic investing strategy is about taking responsibility for your investments. As an investor, it’s up to you to create an investment plan that aligns with your tolerance for risk and financial goals. By establishing clear guidelines for yourself, such as using ETFs and regularly tracking performance on a website, you’ll be able to stay focused on what matters most: achieving long-term financial success.

Of course, this isn’t always easy. It takes work to develop a well-defined ruleset that works for you and includes ETFs, which can greatly improve your performance. It can be challenging to stick with your strategy during times of market volatility or uncertainty, but by taking the time to create a plan that considers ETFs and sticking with it over the long term, you’ll be able to achieve better returns year after year and build a more secure financial future.

Advantages of Systematic Investing over Discretionary Investing

More Discipline, Less Bias

Systematic investing is a more disciplined strategy for investment decision-making compared to discretionary investing. With systematic investing, decisions are based on pre-determined rules and algorithms, which eliminates the emotional biases that can affect discretionary investors. Discretionary investors may be swayed by their emotions or personal beliefs, leading them to make irrational decisions that could negatively impact their investments. By using a systematic approach, investors can achieve better performance and returns on their investments over the year. Additionally, using ETFs can further enhance the benefits of a systematic investment strategy.

Better Risk Management

Another advantage of systematic investing strategy over discretionary investing is better risk management. Systematic strategies, such as investing in ETFs, can help investors manage risk by diversifying their portfolios across different asset classes and sectors each year. This helps to reduce the impact of market volatility and protect against downside risk. In contrast, discretionary managers may be more prone to taking on excessive risk in pursuit of higher returns.

Objectivity and Consistency

Systematic investing through ETFs also provides a consistent investment strategy with the potential for higher returns year after year. Discretionary managers may have conflicts of interest that influence their investment decisions, such as pressure from clients or personal financial gain. In contrast, systematic strategies are objective and based solely on data-driven analysis rather than subjective opinions or external pressures.

Examples of Success

There are many examples of successful systematic investment strategies that have outperformed discretionary approaches over the years. For instance, the S&P 500 Index has historically delivered strong returns when invested systematically through index funds or ETFs. These passive investments eliminate the need for active management and allow investors to benefit from the long-term growth potential of the stock market without having to constantly monitor their investments. With a well-planned strategy and a long-term outlook, investors can achieve their financial goals through systematic investing.

Common Ingredients for Successful Systematic Fixed Income Investing

Successful systematic fixed income investing requires a deep understanding of bond contents. Bond contents refer to the underlying assets that make up the bond, such as credit rating, maturity date, and coupon rate. A systematic fixed income investor must be able to analyze these factors to determine the risk and return potential of each bond. Additionally, incorporating an ETF strategy can enhance portfolio diversification and returns over the long term. It is important to review the portfolio regularly, at least once a year, to ensure it aligns with the investor’s objectives and market conditions.

The average maturity of bonds in an ETF portfolio is a critical factor for success. The longer the maturity, the more sensitive the bond is to changes in interest rates. Therefore, a systematic fixed income investment strategy must carefully manage the average maturity of their portfolio to minimize interest rate risk each year.

Consistency in investment strategy and approach is key to achieving high overall star ratings for ETFs. The overall star rating formula considers factors such as risk-adjusted performance and consistency over the year. By consistently applying their investment approach, a systematic fixed income ETF investor can achieve strong performance results while minimizing downside risk.

A well-defined investment process is essential for successful systematic fixed income investing. This process should include clear guidelines for selecting bonds based on their contents and managing portfolio risks through diversification and asset allocation strategies. Additionally, incorporating an ETF strategy can enhance portfolio diversification and potentially increase returns over the year.

There are several key factors that a systematic fixed income investor should consider, including ETF selection, investment strategy, and annual performance.

Credit Quality

Credit quality, which is the likelihood of a borrower defaulting on their debt payments, remains a crucial factor in determining investment strategy. A higher credit quality indicates lower risk but also lower returns, making it essential to review credit ratings regularly throughout the year to adjust investment strategy accordingly.

Maturity Date

Maturity date refers to when the bond will be repaid by the issuer, typically in years. Longer maturities can be part of a strategy to offer higher yields but also carry more interest rate risk.

Coupon Rate

Coupon rate refers to the annual interest payment made by the issuer on the bond’s face value each year. Higher coupon rates can be a part of an investment strategy to achieve higher yields but also carry more credit risk.

In addition to considering these factors when selecting bonds, a systematic fixed income investor should also focus on diversification and asset allocation as part of their investment strategy. By holding a mix of bonds with different credit qualities, maturities, and coupon rates, an investor can spread their risk across multiple assets and potentially achieve better returns over the year.

Asset Allocation for Better Risk Control in Systematic Investing

Strategic Asset Allocation: Key to Controlling Risk in Systematic Investing

Systematic investment strategies, which involve the use of rules-based approaches to investing, have become increasingly popular among asset owners and investors alike. Such strategy aims to remove emotion from the decision-making process. However, even with a systematic approach, portfolio risk can still be a major concern. This is where strategic asset allocation comes into play. With this strategy, investors can balance their portfolios by diversifying their investments across different asset classes. This helps in reducing the risk of loss and increasing returns over the years.

Strategic asset allocation is a strategy that involves dividing a portfolio among different asset classes based on risk tolerance. The idea behind this approach is that by diversifying across multiple asset classes, investors can reduce their overall portfolio risk without sacrificing returns. For instance, if an investor has a high-risk tolerance, they may allocate more of their portfolio to equity securities or exchange-traded funds (ETFs) as part of their strategic investment plan. On the other hand, if an investor has a low-risk tolerance, they may allocate more of their portfolio to bonds or cash as part of their strategic asset allocation strategy.

Mutual Funds and ETFs: Popular Options for Gaining Exposure to Different Asset Classes

One strategy that investors can use to gain exposure to different asset classes is through mutual funds and ETFs. Mutual funds are professionally managed portfolios that pool money from many investors to purchase a diversified mix of stocks, bonds, or other securities. ETFs are similar but trade like individual stocks on an exchange and track indexes rather than being actively managed. These investment vehicles can provide diversification across different asset classes year after year.

By implementing a diversified investment strategy using mutual funds or ETFs that focus on different asset classes such as equities, fixed income securities or commodities, investors can potentially reduce overall portfolio risk and achieve long-term growth. These investment vehicles offer access to markets that may be difficult for individual investors to access directly and can be held for multiple years to maximize returns.

Effective Risk Management Involves Selecting Assets with the Potential for Excess Returns

While strategic asset allocation strategy is important for managing portfolio risk, selecting assets with the potential for excess returns strategy is also crucial for effective risk management. This involves identifying risk premia strategy, or sources of excess returns that can be captured through systematic investment strategies strategy.

For instance, one common strategy to capture the risk premium is through the value premium, which refers to the tendency for stocks with low price-to-earnings ratios or other value metrics to outperform those with high ratios over time. By systematically investing in these undervalued stocks, investors can potentially generate excess returns using this strategy.

Suitable Fixed Income Markets for Systematic Investing


Systematic investment strategies are becoming increasingly popular among long-term investors seeking stable returns from fixed income markets. Fixed income markets offer a wide range of investment opportunities, including government bonds, corporate bonds, and money market instruments. However, optimum ETF selection is crucial for systematic fixed income investing since different markets perform differently during various market cycles. Having a well-defined strategy is key to successful fixed income investing.

Major Asset Classes in the Fixed Income Market

The fixed income market comprises three major asset classes: government bonds, corporate bonds, and money market instruments. Government bonds are issued by national governments to finance their budget deficits or other expenses. These bonds are considered to be safe investments as they are backed by the full faith and credit of the issuing government. Corporate bonds, on the other hand, are issued by corporations to raise capital for business operations. These bonds carry higher risk than government bonds but also offer higher potential returns. Money market instruments include short-term debt securities such as treasury bills and commercial paper. When investing in these assets, it is important to have a well-thought-out strategy to manage risk and maximize returns.

Optimum ETF Selection

One of the key factors that determine the success of a systematic fixed income investing strategy is selecting the right ETFs (Exchange Traded Funds). Different markets perform differently during various market cycles; therefore, it is important to choose an ETF that matches your target return and risk profile in order to execute your strategy effectively.

During a bull market when interest rates rise, having a strategy in place is important. Bond prices fall leading to lower returns on bond funds. Conversely, during a bear market when interest rates decline, having a strategy is equally important. Bond prices rise leading to higher returns on bond funds. Therefore, investors should consider implementing a strategy by investing in short-term bond funds during periods of rising interest rates while long-term bond funds may be more appropriate during periods of declining interest rates.

Another factor that affects optimum ETF selection is liquidity provision, which is an essential aspect of any investment strategy. Liquidity refers to how easily an asset can be converted into cash without affecting its price. In times of financial crisis or economic uncertainty when liquidity dries up in certain sectors or markets, it becomes difficult for investors to sell their holdings. Therefore, it is important to choose an ETF that provides sufficient liquidity as part of a sound investment strategy.

Rating Periods

Rating periods and strategy are both important considerations when choosing the right ETF for systematic fixed income investing. Rating agencies such as Moody’s and Standard & Poor’s rate bonds based on their creditworthiness, which can inform an investor’s strategy. Bonds issued by governments or corporations with higher credit ratings are considered to be safer investments than those with lower ratings, but may not align with an investor’s strategy for higher returns. Therefore, investors should consider their risk tolerance and investment objectives when choosing an ETF based on its rating period and overall strategy.

The Power of Systematic Investment Strategies

Systematic investment strategies have proven to be a powerful tool for investors seeking consistent returns through a well-planned strategy. By following a set of rules and frameworks, systematic investing can help eliminate emotions and biases that often lead to poor investment decisions, making it an ideal strategy for long-term investors.

Different approaches and frameworks exist for building systematic investment strategies. From quantitative analysis to technical indicators, each approach has its own benefits and drawbacks. However, regardless of the approach taken, it is crucial to follow the rules consistently.

One of the key advantages of systematic investing over discretionary investing is the elimination of emotional decision-making. By following a set of predetermined rules, investors can avoid making impulsive decisions based on market fluctuations or personal biases.

Successful systematic fixed income investing requires a combination of ingredients such as risk management, portfolio diversification, and disciplined rebalancing. Asset allocation also plays an essential role in controlling risk while achieving desired returns.

When considering suitable markets for systematic fixed income investing, it is crucial to evaluate liquidity levels and transaction costs carefully. Understanding macroeconomic factors that affect bond prices is necessary for successful execution.

In conclusion, implementing a well-designed systematic investment strategy can help investors achieve consistent returns while minimizing emotional decision-making. By following predetermined rules and frameworks consistently, investors can mitigate risks while reaping rewards in various markets. So why not consider incorporating systematic investment strategies into your portfolio today?


What is systematic investing, and how does it differ from other investment strategies?

Systematic investing is a quantitative strategy that involves regular, systematic contributions to portfolios, aiming for long-term growth. It differs from other strategies like active trading or buy-and-hold by focusing on disciplined, rules-based approaches to decision-making.

How does systematic investing help eliminate emotional decisions in the stock market?

Systematic investing eliminates emotional decisions by adhering to pre-determined rules and strategies, reducing the impact of short-term market fluctuations and improving overall performance. Systematic investing provides a steady stream of income over time through income investing, making it an attractive option for investors looking to achieve consistent returns and meet their financial objectives.

What is quantitative investing, and how does it leverage data analysis and mathematical models?

Quantitative investing, also known as systematic strategies, uses data analysis and mathematical models to make investment decisions. It relies on computer algorithms to identify patterns in the market and determine optimal times to buy or sell securities. Quantitative investors extensively analyze various types of financial data, including historical price movements, trading volumes, financial statements, and economic indicators. Complex mathematical models are employed to interpret and make sense of the analyzed data. Computer algorithms are the backbone of quantitative investing.

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