I haven't tended to answer anonymous comments or even post anonymous comments lately on the blog but there was an intriguing comment posted yesterday which I think deserves a response.
The comment was:
On paper,this looks great but do you seriously think you can do as well next season?no, thought not.i'll be following with interest.
I always hate it when people ask me questions and answer them on my behalf in the same breath. Putting this annoyance to the side, I think this is a fair question. On paper, the systems and suggested portfolios all look very good but do I really think these returns are achievable?
Before I answer this, it's probably worth sharing a little more info about the systems and why they are built the way they're built. When I started out looking at building systems, I had one idea in my head. It was to achieve a return of 10% per season. Nothing more, nothing less.
That was my aim when I was building systems and it was also my aim all of last season when I was following bets produced by the systems.
Clearly, people can look at all of my systems and see that the returns are much higher than 10% for all systems during backtesting and backfitting. Even during the live season last season, many of the systems had an ROI in excess of 10% and for the majority of the season, most systems had ROI's above 20% although the ROI dropped significantly from February onwards.
This begs the question, why create systems with returns of 20%+ when you are only after a target return of 10%?
Well, it's hardly rocket science but everyone knows how difficult it can be to get systems to perform in line with past results. I've read about lots of systems that looked amazing when they were backtested and yet, when they went live, they've made substantial losses. Therefore, to combat this, I've DELIBERATELY created systems with very high returns.
Everyone knows that systems 6,7,8,21 and 22 had a poor season last season. They ONLY achieved a return between 27% and 37% of the returns achieved during the previous season (which were purely backtested results). Hence, these systems only achieved around a 1/3 of the return I thought they'd achieve last season.
Therefore, I was very disappointed with these systems as I've said numerous times on here.
However, when you look at the returns these systems last season, they ONLY created a return of 5.5%. They had a terrible season and produced a very low return of 5.5%.
Terrible, terrible, terrible. Only words to describe that low level of return they created. Waste of time I guess.
Anyway, you can see where I'm going with this......
Is 5.5% return so bad for a set of systems that performed terribly last season? I'll let all of you reading the blog decide that for yourselves.
I was aiming for a return of 10% last season with these systems, they had a terrible season (second half of season really) and yet, they produced a profit of 5.5%.
Simply, by aiming for something much greater than what you'd be happy with, then you can still achieve a decent profit even when things go wrong. If I had been following systems with an expected profit of 10% last season, I might have managed to achieve a return of between 2% and 3% last season.
The other reason for following systems with such a high return is that it is a long way from an ROI of 20% to making a loss on any system. Last season, some of my systems had a poor season but they still managed to make a profit.
So, to answer the question I set out answering......do I think these portfolio returns can be as good next season as they were last season?
Well, last season wasn't a great year as you can see by looking at the returns and last season, the returns of the portfolio were only 60% of the returns of the previous season. Hence, it was a disappointing season last season for the portfolios I'll be following next season.
What happens if they have an even worse season next season. Instead of only being 60% returns of the previous season, what if the returns are only half as good as last season (that's 50% anonymous!).
Last season, the portfolios made a return of 22.1% overall.
Next season, they might have a disaster of a season and only make a return of 11%. Terrible, terrible, terrible.
I think I'll probably pack in this game if my portfolio could only make an 11% return next season from nearly 1,500 bets I guess.
So, to answer your question anonymous, do I think I can achieve the same returns next season for my portfolio? In all honesty, I don't know but if the returns are half as good as last season, that will do me just fine.