Discontinued Strategies
Running with the Market (9/95 - 1/96)

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Discontinued Strategies
Brief history
Even longtime Fools may have no recollection of this portfolio. Running With the Market (RWTM) was a short-lived, real-money portfolio from back in the days when The Motley Fool was only available on AOL.

RWTM was a very high-risk momentum portfolio run by Dan Running, who worked independently, from outside Fool HQ. Dan's background included a win of the AT&T Collegiate Investment Challenge, propelled by a momentum investment approach that he developed.

Prior to starting Running With the Market, Dan had posted returns in our old Port Folly game exceeding 80% over just a four-month period. He had an enviable record of success in investing, and an interesting approach to boot. This approach involved a low-diversity, high-risk technique that concentrated his money in what he perceived to be just one or two hot industries.

Dan's approach also utilized some "technical analysis," a strategy that involved looking at the stock's movements and chart, as opposed to the fundamentals of the company behind it. Even back in 1995, we heartily disagreed with technical analysis, often making jokes at its expense. But if you don't ever spend any time watching things you disagree with, you'll miss the opportunities to expand your experience and your understanding.

And thus, we offered the Running With the Market Portfolio as an experiment and a curio within our area.

After four months, however, the portfolio was closed because the daily RWTM feature was providing no educational value. The portfolio lost over 60% -- and this, during a period when the S&P 500 held its ground. All the while, the portfolio failed to address its problems in a Foolish, educational manner. This portfolio was closed not because of its poor investment returns, but because of its poor educational returns.

What went wrong
In Dan's first several months online, he bought a bunch of semiconductor stocks that went down a quick 50% as the entire semiconductor sector got crushed in late 1995. One big shortcoming of the approach was that it was founded on the idea that momentum could be used to pick stocks in a very cyclical industry. (As they approach the peak, there's lots of momentum behind them, but the only momentum in front is downward.)

Lessons learned
Lesson number one is that momentum investing strategies exact a high price in terms of risk. Quick gains can be followed by equally quick losses. Momentum buyers, beware.

A second lesson here is the value of technical analysis: zero, none, nada.

Other information
Unfortunately, since RWTM was a feature from our AOL-only days and since it was so short-lived, there are no archived pages to offer.