Passive Index Investing
Index tracking investing, popularized by the late John Bogle, has profoundly changed the way most people invest. Research has shown that investing passively in a stock market index (such as the S&P 500 index) has outperformed the vast majority of actively managed mutual funds (S&P Dow Jones Indices, 2016). Picking a basket of stocks to construct a winning portfolio has proven to be very difficult. Some estimates show only 1 our of 20 professional stock-pickers are able to beat the market on a consistent basis.
Research into historical stock and market movements shows there are multiple patterns that reoccur: every week, every month, and every year.
A handful of these stock market patterns are widely known: the ‘January’ effect, the ‘End of Quarter’ effect, the ‘Pre-Holiday’ effect, the ‘Sell In May and Go Away’ effect, and the ‘Santa Claus Rally’.
The Stock Trader’s Almanac states
“Since 1969, the Santa Claus rally has yielded positive returns in 34 of the past 45 holiday seasons”.
While some of these patterns have persisted for decades, typically once a market phenomenon becomes widely known, the secret is out and the easy money is gone.
Quantitative finance is a field of applied mathematics concerned with modeling of financial markets. With the rise of the computer era, it has made it possible to crunch enormous volumes of data in extraordinarily short periods of time.
Quantitative Analysis is a broad term used by data scientists to better understand this sea of data. Data scientists create increasingly complex mathematical models to spot trends in the financial markets. These complex models are generally built and fine-tuned over a period of many years through a rigorous analytical process.
Quantitative Investment Management
Quantitative Investment Management at Hempel Wealth Management combines the advantages of low cost passive index investing with the analytical power of data science. This hybrid between passive and active index investing is profoundly shifting forward tools that were once affordable only by Institutional Wall Street firms and putting them in the hands of individual clients.
Our scientific approach to investing combines the low cost of passive index investing, proprietary and academic quantitative research, as well as risk management to construct portfolios designed to maximize YOUR investment success.