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Research Approach and Selection Methodology

Multi-Factor Stock Selection Approach (Long Term Investing Strategies)

Our research approach has been fine tuned over the years by our own investment experience and observation of the markets. For selecting stocks we combine multiple Fundamental Analysis and Technical Analysis selection factors. We give equal weight to our selection factors before finally picking a stock for publishing in our InvesTrak E-Newsletter.

Major Stock Selection Factors

Restricted Universe Every month we screen for stocks from a restricted universe such as S&P 500 and Russell 1000. The Russell 1000 comprises the largest US stocks by market capitalization. Our preference is in the order of Large Cap, Mid Cap and Small Cap stocks. While there are numerous stocks trading in the US, restricting the screening to established stocks helps us identify more stable ones.

Small Cap and Mid Cap Stocks have excellent potential but they also carry a higher risk level and we are more stringent while selecting stocks in these categories for our newsletter.

Trend Analysis From this restricted universe, we screen for stocks which are displaying respectable trending characteristics. We perform Price Trend analysis which includes analyzing multiple moving averages.
Filtering for Price Extension Our preference is to highlight stocks which are not extended in price. We use both technical analysis and fundamental analysis to determine this.
Applying Fundamental Filters After a stock meets our initial technical criteria, we apply multiple fundamental factors to determine how likely it can have positive price movement both in the near term and long term. These factors include the nature of business, inception date of the business, various income statement and balance sheet factors.
Applying Additional Technical Factors If a stock meets both our initial technical and fundamental criteria, we next analyze price consolidations with our unqiue chart analysis. If we believe the stock has potential for a healthy breakout from a price consolidation we typically select that stock. For short term investors and traders we then establish price support levels which may be used for risk management purposes.

ETF Selection Factors (Long Term Investing Strategies)

Asset Allocation Focus

For long term investing we primarily use an asset allocation approach to design risk-adjusted and blended ETF Model Portfolios.

Restricted Universe There are more than 2000 ETFS presently available for investors but we restrict our selection to those ETFS which are not leveraged or inverse. We also attempt to select ETFS which have respectable trading volume so illquid ETFS can be weeded out.
Diversification From this restricted universe, we select ETFS from different asset classes including Equity, Fixed Income, and other Alternative Asset Classes to build a diversified mix.
Calculated Allocation Weights For our ETF Model Portfolios we then calculate the allocation weights for the different ETFS representing the asset classes based on their long term performance. With this approach, we typically have a higher allocation to Equities, followed by Fixed Income and other Asset Classes.
Applying Macro Factors Macro factors play a crucial role while selecting ETFS. For example, considering the present US/China relations we try to limit China ETFS as much as possible unless the technical situation of such an ETF is compelling. The macro issues surrounding Conventional Energy sector also restricts our selections considerably in that sector.