Backtesting And Maintaining Objectivity

Few words in the English language carry worse connotations than the term ā€œbacktested.ā€ As seasonedĀ investors, we have first hand experience trusting backtested strategies.
At one point or another, mostĀ financial planners and investmentĀ advisors have to face the decision on whether or not to purchase a managed future strategy. Plenty of these tout non-correlated, low risk, consistent and positive returns over long periods of backtesting–and then trade below the IPO price for years.
Backtesting a strategy to see how it has performed historically is highly valuable data– don’t misconstrue this post. But it is also important to note that to develop and choose a strategy based solely on past performance is not a sound, solid approach to investment management.