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A high-return, low-risk investment strategy is the Holy Grail pursued by all investors throughout their lifetime. The purpose of this study is to establish a robust investment strategy, termed "Soaring-Robust Investing," that aims to achieve significant gains with limited losses and maintain consistent profitability regardless of whether the Taiwan stock market trends in a bull or bear market. The strategy originates from the concept of soaring stocks.
This study first focuses on 2021, when the Taiwan stock market showed an obvious bull market trend, selects 3 soaring stocks, observes and summarizes their common characteristics, and then uses the Python program to repeatedly test what stock selection conditions, buy in and sell out conditions can get better return on investment. It took one year to carry out nearly a hundred times of backtesting, and finally established a robust investment strategy SBULL2021, including stock selection strategies (meeting 19 stock selection conditions at the same time), buying strategies (including buying signal, buying price, buying number of shares) and selling strategy (including selling signal, selling price, and selling number of shares, where the selling signal is any one of the five selling conditions). Then, in 2022, when the Taiwan stock market showed an obvious bear market trend, selects 2 soaring stocks, and repeat the above research steps. It took 3 months to conduct dozens of backtesting, and finally established a robust investment strategy SBEAR2022, in which the stock selection Strategies must simultaneously meet 17 stock selection criteria.
According to the backtesting results from 2020 to 2022, in terms of investment performance, the geometric mean of the return on investment(ROI) of SBULL2021 in the past three years is 10.75%, which is 3.92 times that of Yuanta/P-shares Taiwan Top 50 ETF (2.74%); in terms of investment risk, The standard deviation of the ROI of Yuanta/P-shares Taiwan Top 50 ETF in the past three years is 21.65%, which is 1.95 times that of SBULL2021 (11.08%).
In terms of investment performance, the geometric mean of the ROI of SBEAR2022 in the past three years is 8.23%, which is 2.15 times that of Yuanta/P-shares Taiwan Top 50 ETF (3.82%); in terms of investment risk, The standard deviation of the ROI of Yuanta/P-shares Taiwan Top 50 ETF in the past three years is 22.28%, which is 2.82 times that of SBEAR2022 (7.90%).
In terms of optimizing the performance of investment strategies using three commonly used technical indicators, the inclusion of a single Smoothed Moving Average Convergence Divergence (MACD) indicator yields the best optimization benefits for the investment performance of SBULL2021. Similarly, the inclusion of a single Stochastic Oscillator (KD) indicator yields the best optimization benefits for the investment performance of SBEAR2022.
The robustness of the investment strategies SBULL2021 and SBEAR2022 in this study has the following three meanings:
1. Both investment strategies can withstand the test of different market trends (bull market, bear market and consolidation market).
2. In the bear market in 2022, the loss of Yuanta/P-shares Taiwan Top 50 ETF is 40.48 times of the loss of SBULL2021; and SBEAR2022 even has a small profit.
3. In the bull market in 2021, although the profit of SBEAR2022 is lower than that of Yuanta/P-shares Taiwan Top 50 ETF, the geometric mean of the ROI of 3 years is still better than that of Yuanta/P-shares Taiwan Top 50 ETF; the profit of SBULL2021 is even 1.73 times that of Yuanta/P-shares Taiwan Top 50 ETF.
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