How IDT Software Works
AS A FOUNDING MEMBER OF KINGDOM ADVISORS
IDT Software was created with the focus of building a portfolio management product based on applying the Biblical principles of managing money. Our culture has ignored the collection of the Biblical tried and true principles yet have acknowledged them separately as a proven fact. Our desire is to provide technology that will enhance the effectiveness and competence image of the advisors wanting to provide financial advice using the Biblical principles He has provided us to handling and managing His assets. The following is a description of how the Software program works. Some of the basic Biblical principles are listed, described and referenced at the end. After reading this description summary, you may be able to see how the Biblical principles were applied in the algorithms. Please feel free to contact me, Paul Berry, with any comments or questions firstname.lastname@example.org.
IDT’s Investment Decision-Making Technology is a cutting-edge collection of algorithms that can be considered the beginning stages of artificial intelligence to use Biblical principles to manage portfolios. There have been many naysayers that believe that no technology can manage investment portfolios. With what I understand about the algorithms that hedge funds and other large institutions use, I can understand why someone would conclude that algorithms do not work. This is because most of these money managers use the same pool of investments and the same algorithm. Therefore, when one institution gets a sell or buy signal, all of them get a sell or buy signal. This, in many instances, is what makes the markets have major market swings. IDT Software has taken a different approach.
Each investment advisory firm using the IDT Software will have a unique pool of investments, completely different from anyone else’s. Also, when an advisor receives a buy or sell signal, it does not mean that other advisors are receiving the same buy and sell signal at the same time. Therefore, one advisor that receives a sell signal for a particular investment asset will have few, if any, competing advisors receiving that same signal. Thus, the risk of having major losses due to not being able to sell out at an appropriate level is greatly reduced. Also, the opportunity to buy that investment at an appropriate level should not be lost due to other advisors using IDT software.
The breakdown of how the investment decision-making technology algorithms work is very complicated. The short version of how the IDT Decision-Making program works is as follows:
As the Investment Advisor your most important role in this process is the selection of the assets for the investment pool you want the investment decision-making technology algorithms to use. The old adage – garbage in, garbage out – applies here. If your objective in a growth portfolio is to beat the performance of underlying benchmark, you must provide the algorithms assets to use other than money markets. Each asset you select should be in the top quartile of its peers in performance. We recommend you select assets to fill the asset category list provided by Morningstar and as many sector assets as you desire.
Determine how many open positions you normally would hold in a portfolio. Most advisors use between five and ten but you can use more if you want. The entire investment pool should consist of between five and ten investments for every open position in the portfolio. You would send us the symbols by email.
The more open positions allowed in each portfolio will produce more transactions over time. On average, with a ten-position limit, there will be one transaction per month per portfolio. On average, using the IDT program, you will only spend around thirty minutes per day managing your clients’ portfolios while eliminating the time needed performing investment and market research.
We will run a three-year performance and benchmark back test for up to five portfolios. You will receive an email with the results.
When you subscribe to the service we will build out up to twenty portfolios which is our basic package.
The five algorithms that the IDT program uses will begin to run nightly after downloading the closing price and other asset data for them to use to make its investment decisions.
The ranking algorithm will rank all of the investments in the pool from best to worst based on the performance of three time periods, moving average, volatility, weightings for each and some proprietary tweaking factors for each portfolio.
If there is a position to be filled in a portfolio, the selection algorithm will choose the best investment from the ranking list. However, it will kick out any investment that is classified as violations, such as, category limits met. overbought, performance, volatility or moving average violation. This algorithm also takes into consideration whether the market is overbought or oversold. Just like it’s the individual and investment is overbought, we don’t want to buy into an overbought market or sell out in oversold market. We want to buy low and sell high. This algorithm also protects the performance of a portfolio in a bear market yet avoids getting whipsawed in short-term market swings by following the algorithm rules without the human emotions of fear and greed that would normally occur.
The profit-taking algorithm protects the profits of an investment that may have reached its peak. For instance, if an investment has become overbought based on its RSI level and has turned down and reached a set RSI level, this algorithm will produce a sell signal. The reason an investment is being sold will be displayed In your daily performance report.
The sell algorithm determines an outright sale. A stop loss point, moving average or performance violation may have been reached. IDT creates its own volatility calculations and our stop loss points are determined by this calculation. It’s not a standard guess.
The replacement algorithm kicks in when an investment position is not performing as well as another investment asset in the pool. This algorithm will not only determine the selling asset but also the investment asset in the pool to be purchased. Again, all of the selling reasons will be shown in your daily position report.
All of the algorithms operate using reasoning rules that we share with our active clients as they occur. The objective of sharing these reasoning rules with you is so that you can explain to your clients why the algorithms and you are doing what you are doing.
The algorithms used by the investment decision-making technology program are successful at producing investment returns equal to or exceeding the underlying benchmarks of the portfolio for several Biblical reasons.
It invests with the expectation of a return in an appropriate time – Ec: 11-1 “Cast your bread on the surface of waters, for you will find it after many days. This also implies that there will be short periods of unprofitable times. It is designed to avoid getting whipsawed during short-term market swings of around 5-10%.
It avoids the emotions of fear. Not being fearful is described in the parable of the talents. Here the steward told the master who owns it all in Mt. 25: 25 - And I was afraid, and went away and hid your talent in the ground; see, you have what is yours”. The master called him a “wicked and lazy servant” in verse 26. Then in verse 27 the master said, “Then you ought to have put my money in the bank, and on my arrival I would have received my money back with interest”.
It avoids the emotion of greed Prov. 15:27 “The greedy bring ruin to their household…” It doesn’t over allocate to a hot sector.
It follows the diversification principle: Ec. 11:2 – “Divide your portion into seven, or even eight, for you do not know what misfortune may occur on the earth”. It not only recommends multiple positions in a portfolio but also multiple asset categories in order to not over allocate. Thus, spread the risk.
It does not try to predict the future. 2 Peter 1:21 ESV – “For no prophecy was ever produced by the will of man, but men spoke from God as they were carried along by the Holy Spirit”. Only God knows the future. The feudal astrology and even the use of math attempts by man has led to folly.
It does not rely on past performance Is. 43:18 “Forget the former things; do not dwell on the past”. It looks at developing trends in asset categories as they rotate into favor and sells out of those categories going out of favor.
It makes its decisions, without emotions, based on what is happening in the now time period with each investment and the overall markets. Is. 43:19 See, I am doing a new thing! Now it springs up; do you not perceive it? I am making a way in the desert and streams in the wasteland.
There are predetermined non-emotional investment rules that dictate, without emotions, what and when to sow or buy. Ec. 11: 4 NAS “he who observes the wind will not sow” and in 6-7 “In the morning sow your seed, and in the evening do not withhold your hand; for you do not know which will prosper, either this or that, or whether both alike will be good”.
There are also predetermined non-emotional rules of when to sell. Ec 11:4 “… And he regards the clouds will not reap”
It does not seek knowledge concerning wine or what went wrong because this leads to missed opportunities to buy and sell. It just follows set rules. Prov. 14:12 NKJV “There is a way that seems right to a man, But its end is the way of death.
These principles are true and not new. EC.1:9 ESV “What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun”. Judy Blue once stated “If it is true it is not new and if it is new it is not true”. The one disclaimer is that if this program should not perform as you think it should, it is NOT because the principles are not true!
The only thing that it does not have to produce the results you need for your clients is your list of quality investment assets – mutual funds, stocks and/or ETF’s. To try it out, click the register tab to register your firm, send us a list of investment assets. We will do the rest. No obligation.