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No. of Recommendations: 10

Let me just say that although I'm using the example of today's poster of "millionaires' club" my intention is not to attack him personally. Rather it's to point out that as the popularity of Mechanical investing rises, so do the misconceptions surrounding it.

To avoid the personal aspect, I'm not using the poster's name. (besides, I don't know it).


My initial reaction to this post was much like the others posted here: "Wow! Bravo!!" and all that. But as I dwelt on it, it slowly dawned on me that the author had not employed very sound MI strategy, and had even shown a somewhat unFoolish approach toward investing.


It's not just that he invested all his money in a single screen. I can understand the decision to "go for it." But if I'm not mistaken, the RS-IBD is not a backtested screen, so this decision becomes more suspect. The poster explained his main reson was "because it had the best returns." This is a version of the "what's working now" theory. It contradicts one of the major tenets of Mechanical investing: to use historically validated mechanisims.

This mistake may well have been an innocent one. As a newcomer myself, I can say that it's not always clear that some screens discussed on this (and on the MI board) are more theoretical than others. Some people, including the poster in this case, may not be aware that they're investing in an untried screen.

however, ** reveals that his subsequent "decisions" were similarly based on short-term evidence. He first switched to a 3 stock screen and then back to a 5 stock screen based on stock performance within a 9 month period--hardly a statistically significant period of time.

As I said, I'm new here. Maybe that means I sholdn't be so darn preachy in the first place, but it also means that I'm very aware of the impact of "discovering" MI investing. It's like being in a dream of some kind where suddenly, almost inexplicably, money starts pouring down on you. Well, it's no wonder some people get a bit carried away.

So, on a personal level I'm absolutely cheering ** on. But I'm a bit surprised none of the more experienced members of the community have weighed in on this one.
If your silence is meant to be eloquent, may I respectfully suggest that a more direct approach may be in order.
--at the very least, untested screens should *always* be clearly labled as such.

In the Foolish spirit (minus the Amuse part), :)

Greta



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