About


Source: Vancitybuzz

Welcome to my blog!

My name is Gogi Grewal and I live in scenic Vancouver, BC. I am a CFA Charterholder and Professional Engineer (P.Eng). I'm very passionate about investing and that's what this blog is all about. 

When I was in Grade 11, I enrolled in a new course at my high school that was strangely titled "Creative Consumerism." It was based on David Chilton's best selling personal finance book "The Wealthy Barber." Our teacher, Mr. Kelly, started off the first class by saying with a straight face "This will be the most important class you will ever take in your life." And we was right. I was fortunate enough to be taught about the long-term growth potential of stocks, the power of compound interest, how to file my own taxes, select the best credit card, buy the right insurance and write a will. All this while I was only 17 years old.

The unfortunate part was that this was in 1999 (near the peak of the tech bubble) and I decided to put $2,000 in a mutual fund with my new found knowledge. Six years later when I went to check the value of my portfolio, I was in for a shock. I realized the portfolio had a dramatic 50% fall and then a 100% rise, but was essentially flat since my initial purchase. It was then that I realized how markets were irrational and moved in cycles.

Initially, my mindset was to exploit this cyclicality through value investing (i.e., “buy low, sell high”). I especially loved the idea of buying something that had been falling for years and was more than 50% off its all-time highs. Who doesn’t like a bargain basement deal, right? However, the majority of the time, what I thought I had bought cheap ended up getting even cheaper and staying that way for a long while. On average, I lost money by fighting what's known as momentum.

Momentum is the idea that markets with strong relative strength continue outperforming in the short-term while weak markets continue to underperform. There have been studies going back over 200 years showing how momentum has consistently outperformed broad asset classes.

Luckily, I learned about momentum investing about 5 years ago after finding research papers by Meb Faber and Gary Antonacci. The most important book I've read on the topic is undoubtedly Gary's "Dual Momentum Investing."

I realized that it was actually riskier to buy stocks making all-time new lows than buying all-time new highs. Instead of “buy low, sell high” it is much more effective to “buy high, sell higher.” I learned that you need to be in tune with market forces and no matter what, do not fight the trend. 

Not only does momentum have strong backtest data, but it also makes sense. The first post on this blog explores this very topic. Momentum investing is also simple to implement and maintain. Finally, it is systematic - meaning there is no room for discretion and our human emotions to run havoc.

Ever since making this shift to a simple and systematic momentum strategy (which also happens to be low-cost, diversified and has minimal trade activity), I gradually began growing my portfolio and significantly reducing my stress.

Best wishes to you in your investing journey.

(original: Jun 2015, updated: Aug 2016)

4 comments:

  1. Hello Mr Grewal. I'm a big fan of Gary's technique too. I just read your post on how to aplly the dual momentum technique for foreign investor.

    I would like to know what you would do (or did) in a TFSA using Gary's dual momentum. I started a year ago by using Canadian ETF for US equities (HXS or XUS) and ZAG for bonds but since reading your post I think I'll convert all my TFSA to US$.

    Best regards,

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  2. I just read one of your comment in an older post, question answered!

    Thanks

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  3. Hello Gogi. Great post on Dual Momentum for foreign investors. I'm a fellow Cancuk and I'm wondering if you could provide the historical returns for Canadian investors in 10 year segments (or better yet rolling 10 year periods). Given the massive swings in the C$ over the past 40 years I suspect that the viability of dual momentum for Canadians will vary dramatically from decade to decade. Although your 1971 to 2014 analysis is compelling I suspect that most of us investing in a strategy are unlikely to wait more than 10 years before deciding to abandon it or continue (even though we all know that's not optimal behaviour). I'm 55 and I'm trying to get a handle on the likelihood of Dual Momentum outperforming buy & hold over then 10 to 15 years. A look at historical rolling 10 year results would be more informative than an analysis of the complete 43 year holding period starting in 1971.
    Thanks.

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  4. Hello Mr. Grewal,

    I am writing to you on behalf of QuantInsti Quantitative Learning Pvt. Ltd.

    We are one of the pioneer fraternities in Algorithmic Trading worldwide, offering certificate-level courses in Algorithmic Trading and Quantitative Finance. Our flagship course ‘Executive Programme in Algorithmic Trading’ (EPAT) is one of the most comprehensive courses in Algorithmic and Quantitative Trading.

    We, at QuantInsti have followed your blog with great interest, which has some very interesting posts on algorithmic trading and strategies. We thank you for the wonderful work you are doing for the community. After all, learning is all about sharing your insights and gaining for others.

    In this vein, I would like to explore partnership opportunities which mutually benefit us by working together. There are a variety of options that can be worked from writing guest posts, getting featured in your “blog roll” as well as cross-promotions.

    What are your views on such a collaboration? Looking forward to your response and suggestions.

    Regards,

    Subhkirti Sinha

    ReplyDelete