Torrance Financial Advisor / Investment Selection formulas

When our Market Direction Formulas dictate that there is a reasonably high probability of market returns, we then rely on our Investment Selection Formulas to determine what investments should be chosen for portfolios. Rather than rely on luck, RWA has developed a number of proprietary ranking systems to determine investments that should produce the best combination of risk and return. By using a specific formula to rank all investments available in our markets we are able to eliminate human emotion and create specific rules for when it’s appropriate to buy, hold and sell.

Our ranking methodologies are built from years of quantitative fundamental analysis (QFA). QFA is a way of determining the factors that have produced the best results on a historical basis. As an example, all stocks might be ranked based on their Sales Growth for the Trailing Twelve (12) Months. They are then placed in deciles (top 10%, 11-20%, 21-30%, etc.). We would then choose a re-balancing option such as quarterly (every three months). RWA is then able to know historically which decile produces the best risk adjusted return, as well as if there is a robust pattern. A robust pattern would be that the top decile performs the best, the worst decile performs the worst, and each decile between is gradually between the two.

There are literally thousands of potential factors that could be used for QFA. RWA has analyzed many of these to create the most desirable combinations for each particular investment category, such as Large Company Stocks, Medium Size Company Stocks, Small Company Stocks and International Company Stocks. RWA’s automated management systems ensure that all investments are re-balanced at optimal intervals for return, risk adjusted return, and after tax investment.