One of the reasons I believe in an equally-weighted portfolio was exhibited with the performance of HEDGEfolios yesterday. Unlike the S&P 500 which declined 3.1%, the equally- weighted HEDGEfolios universe of 3414 stocks declined 1.0% from the open to the close. Part of the reason for the smaller loss was the fact that I have 29% DOWN signals - not 100% long as the index assumes. If HEDGEfolios had been 100% long, it would have lost 2.3%.

I understand the benefits of concentrated portfolios and the effects of market cap weightings. However, at times these strategies have their downsides and you can look at yesterday to figure that out. Small and Mid Cap stocks did better and so did indices with a large number of constituents.

In normal weeks, I spend very little time analyzing the strategies that I use for my portfolio management. If there isn’t much that sticks out, I just practice my normal analytics. It’s one of those “if it isn’t broken, don’t try to fix it” moments. However, weeks like we just went through - the extreme and really painful ones - are full of information. These are the times I use to evaluate what works and what doesn’t. Portfolio construction - long vs. short - diversification - position sizing - concentrations - betas - value vs. growth, large vs. mid vs. small cap, etc. All that stuff is there for you to learn from this week. I know yesterday may be something you’d like to forget or prefer just to enjoy your weekend without reliving the painful trading if you were net long. If you were net short, maybe you feel like smelling the roses and relaxing for a few days. However, regardless of how you were affected by the past week, I strongly encourage you to analyze everything you can.

HEDGEfolios performance differentials have come from using weeks like this to learn. Some times, I notice a few things that are in conflict with techniques or portfolio management concepts that I believe in. It causes me to challenge myself and think about trying something new. Other times, I reinforce or refine what I am previously doing. Regardless, it’s a great opportunity - take it.