Stocks
Growth and corporate profits
ALGOLODGE · INVESTMENT PHILOSOPHY
Why invest beyond the stock market?
It is not only how much a portfolio can earn. It is also how it survives the difficult periods.
01 THE LONG TERM
When a long-term approach is tested
Historically, shares have been among the best ways to build wealth over the long term. But equity markets do not always rise. History includes five- to ten-year periods of sideways or falling markets. Sometimes it has taken decades for investors to recover their capital, especially after inflation.
Long-term investors face a dilemma: being right about equities over several decades is not enough. They must also survive the difficult periods along the way.
02 FLEXIBILITY
Capital when opportunities arise
AlgoLodge trend-following models can take long and short positions and may therefore perform positively even when equity markets decline.
Alternative investments can in that respect serve some of the purpose traditionally fulfilled by cash in a portfolio, with the possibility of earning returns while waiting.
03 DIVERSIFICATION AND RISK MANAGEMENT
Portfolio protection
Alternatives can provide a form of protection against equity-market losses. Market turmoil may create opportunities for trend-following strategies. Falling equities could therefore benefit AlgoLodge models, but there are no guarantees.
Like equities, trend-following strategies can experience long periods of poor or absent returns, whether stocks are rising or falling.
04 REALISTIC EXPECTATIONS
No strategy works all the time
An extended drawdown in an AlgoLodge model does not necessarily mean something is wrong. Market conditions may simply be unfavourable to the strategy, just as equities do not always rise.
Investments that make money every month or every year are exceptionally hard to find. The objective should not be to eliminate all losing periods, but to build a portfolio in which weakness in one investment does not overwhelm the rest.
THE KEY PERSPECTIVE
The real strength of diversification often becomes apparent not when everything is going well, but when something goes badly wrong.
That is when holding capital outside the stock market may prove most valuable.CORE PRINCIPLE
One portfolio. Different drivers.
Equities, bonds and alternative investments can provide different sources of return. A broader allocation may reduce reliance on one market, although relationships change over time.
Bonds
Interest and regular income
Alternative investments
Trends and price movements
Combining investments driven by different factors can change the overall risk of a portfolio.
DIFFERENT RETURN DRIVERS
Returns without relying on economic growth
Long-term equity-market returns are closely linked to economic growth and corporate profits. AlgoLodge trend-following models operate differently.
They seek opportunities in price movements, whether the economy grows or contracts. They do not require economic growth or rising share prices to generate potential returns.
That is one of the key differences between traditional equity investing and trend-following management.
AN OLD PRINCIPLE · STILL RELEVANT
“A wise person does not put all their eggs in one basket.”
Adapted from an early English translation of Don Quixote by Miguel de Cervantes.
Diversification means more than simply holding several investments: it means allocating capital to different sources of returns.
PORTFOLIO ALLOCATION
How much should be invested in alternatives?
Allocating around 20–30% to alternatives can be a reasonable starting point for a long-term portfolio. Too small an allocation may have little impact; too large an allocation may make weak periods in alternatives hard to tolerate and lead to selling at the wrong time.
The best investment strategy is one that its owner can stick with, even through difficult periods.
Stocks 60 %
Bonds 20 %
Alternative investments 20 %
TEST YOUR ALLOCATION
Open advanced comparison
Build your own portfolio
Combine equities, bonds and AlgoLodge models. Choose your allocations and explore how the hypothetical portfolio might have performed historically, including risk and return.
RELATIONSHIPS BETWEEN INVESTMENTS
What does correlation mean?
Correlation measures how two investments’ returns have moved together historically, on a scale from −1 to +1. At −1 they move in opposite directions, for example one rising as the S&P 500 falls. At +1 they move together, while 0 indicates no linear relationship.
Historically, AlgoLodge models have shown correlation close to 0 with the S&P 500 and have not closely followed equity-market movements. An equity crash therefore need not hurt the models, but does not guarantee that they will benefit.
Combining low-correlation investments may reduce the chance of everything performing badly at once. That could help limit drawdown and shorten recovery periods.
−10+1
Opposite movementsLow correlationSimilar movements
OUR PHILOSOPHY
A considered trading process.
Method, risk control and diversified exposures are three parts of one process.
Follow the trend
The models seek opportunities in established price trends rather than predictions about the future.
Manage risk
Position sizing, market exposure and ongoing risk monitoring are central to management.
Diversify exposure
Different markets and models may complement each other and make the portfolio broader.
HELP CHOOSING
Which model—or combination—should you start with?
There is no single right choice. The number of models, their traded markets and the level of fluctuations you can accept matter more than picking the most recent winner.
Start broad with Hot Commodities
For a single model, Hot Commodities is a natural starting point. It seeks trends in commodities, currencies, equities and equity indices.
Learn about Hot CommoditiesCombine different markets
Hot Commodities and Krypto Knight provide exposure to both conventional markets and digital assets. For a narrower digital component, Hot Commodities could instead be combined with Satoshi or Vitalik.
Diversify further
Adding models spreads capital across more markets and trading systems. This may improve diversification, but models may also hold overlapping positions or struggle at the same time.
Compare all six modelsInterested in commodity sectors only?
Gold Bug seeks trends in metals and related markets. Soft Commodities focuses on coffee, sugar, cocoa and cotton. Both can take positions in rising and falling markets in their respective sectors.
These are more concentrated than Hot Commodities and need clear trends in the markets they trade.
Trade without owning bitcoin or ethereum
Satoshi focuses on bitcoin and Vitalik on ethereum. Each model follows a single market and has a lower minimum investment than the other models. Both still involve substantial risk.
Krypto Knight is broader, trading up to 15 digital-asset markets, so it is not dependent on a strong trend in just one asset.
COMBINE MODELS
Three example model combinations
Combining trading models with different market exposures may spread risk and reduce reliance on any single model or market.
Conventional markets
Hot Commodities · Gold Bug · Soft CommoditiesExposure to commodities, metals, currencies and equities. Some models may trade overlapping markets.
Digital assets
Satoshi · Vitalik · Krypto KnightDifferent models operating in digital assets. Prices may still move sharply in the same direction.
All six models
Conventional and digital marketsBroader exposure, but allocation should account for volatility, risk and capital needs.