Backtesting your portfolio is an integral part of developing your wealth management strategy.
While most portfolio backtesting methods are very sophisticated and involve expertise in programming and statistics, we can use platforms such as PyInvesting.com to simply fill in a form and create a backtest. You will be able to create your own customized stock portfolio based on your investment strategy. After running your backtest, we will evaluate your portfolio’s performance by showing a time series of your strategy’s net asset value (NAV) since the start of the simulation.
One of the benefits of backtesting your portfolio is that you will be able to test whether your strategy works based on historical data. You will also be able to adjust the different signal parameters and observe its impact on your strategy’s performance. For example, if your investment strategy depends on the value factor (i.e. selecting stocks with low PE ratio), and you are unhappy that your value strategy does not do well during certain periods of time, you can tweak your strategy to depend on both the value factor and the quality factor. By diversifying across different signals and optimizing your strategy, it could potentially improve the overall performance of your strategy.
Backtest Portfolio via Pyinvesting helps investors to quickly assess the feasibility of their optimization approaches by exposing backtesting outcomes in real-time, revealing trade-offs between risk and return. Pyinvesting portfolio backtesting uses many of our current portfolio optimization and performance assessment tools to model portfolio results using historical evidence. As a result, you get a clear understanding of how the portfolios responded to market shifts over the chosen timeframe.
Dividend stocks and defensive stocks such as infrastructure and low price to earnings stocks with positive cash flows, are commonly sought after by investors who want equity like yields but also want some extra security.
Those who invest tactically often want to buy cyclical towards the start of the cycle such as tech, and switch more into services, products, or even healthcare as the cycle progresses. Others may see things like healthcare more secular than cyclical due to aging demographics, but it depends on political conditions.
Investors also look to dividend stocks as dividend size essentially means that a certain sum of earnings is more or less "guaranteed" per year.
A lot of different factors will impact a business's health. Even for large companies selling non-seasonal products, they would eventually have quarterly earnings underperforming the dividend at some point. A strong portfolio can also increase the odds of cutting the payout if it cannot be maintained at its current level. Defensive securities are also called securities with relatively weak US equity exposure and low price drawdowns.
The energy sector is less than moderately compared to the overall market and appears to have higher than average dividends. Yet oil and gas companies use a lot of leverage as they are capital-intensive, and they are heavily tied to oil commodity market efficiency. The oil market is about twice as unpredictable as the US stock market, vulnerable to abrupt downward movements. This uncertainty leaves the oil sector more vulnerable to significant drawdowns than usual. Any business whose cash flow is heavily tied to a single or small commodity price is at risk.
During portfolio construction, diversification is crucial. Owning shares from each asset class is not enough. You should also diversify within each class. Ensure that the shares in a specific asset class are distributed among different business sectors. Investors can achieve excellent diversification through mutual funds and ETFs. Such investment funds allow individual investors with comparatively limited sums of capital to achieve economies of scale enjoyed by significant fund managers and institutional investors.
© PyInvesting 2025
