What you want to achieve
Quantitative and systematic investing for private investors
Systematic investing replaces gut feel with rules based on data. Many of the world’s largest funds work this way, and private investors can use the same principles.
The challenges
- Back-tests that look better than real-life results.
- Overfitting rules to past data.
- Abandoning a system during a losing streak.
- Getting reliable data and tools as a private investor.
How a disciplined process helps
Start with factors that have a long record
Value, profitability, momentum and low downside risk have been studied across many markets and decades. Each has also had long losing spells, which is why combining them helps.
Our guide to what works in investing summarises the research.
Keep rules simple and test honestly
Fewer, clearer rules are less likely to be overfitted. Test across different periods and markets, and expect live results to be weaker than back-tests.
Our article on risk ratios shows how to compare strategies.
Stick with it, within limits
The hardest part is following the rules when they are not working. Decide in advance how long and how deep a losing streak you will accept before reviewing the system.
Discipline is the edge.
Where to start
- Guide: What works in investingThe research behind a factor-based, rules-driven approach.
- Sharpe vs Sortino vs CalmarWhich risk measure to use.
- Free investing toolsCalculators and checkers for pensions, risk and portfolio quality.
- How to use ChatGPT for investingPrompts that actually help.
Questions people ask
Do I need to code to invest systematically?
No. Many systematic approaches use screens and spreadsheets. Coding helps but is not essential.
Is quant investing only for big funds?
No. The principles of rules, factors and risk limits work for private investors too.
Does systematic investing always work?
No. Every system has losing periods, and results are not guaranteed.
Important: this page is education and information only. It is not financial advice or a personal recommendation, and it does not take your circumstances into account. The value of investments and pensions can fall as well as rise, and you may get back less than you put in. Past performance is not a reliable indicator of future results. If you are unsure what is right for you, speak to a regulated financial adviser.