Has anyone seen the T-Quant website? This financial model was audited by KPMG and claims that without using back fitting or optimisation, the model outperformed the S+P 500 by 3 times from 1975 to 2005! Too good to be true I know, but the KPMG report??

It is not really a challenge at all to outperform the S&P500 (or any other index) by 3 times (and not just over 30 years but every single year). Any index is just the average which sets the bar very very low and therefore 3 times the average does by no means at all sound too good to be true (unless you are a mutual fund manager or you actually think mutual funds are a good investment choice).

My apologies, the model outperforms the S+P500 by an average of 3 times per annum over a 30 year period. Two questions if I may: As a novice investor how can I do consistently better? Is that not an above average return for a purely mechanical technical/fundamental stock picking model?

Even if the model outperforms the S&P 500 3 times each year I am not impressed at all simply because to set any standard byased on any index set the bar very low.

Here is an example which may help you understand my point of view:

Assume that you participate in the high jump and a track and field event. You set the bar at just one foot and than jump fout feet. Yes, you have outperformed the average (in this case one foot by more than 3 times) but by no measure have you performed well. Does it make sense?

Any benchmark sets the bar extremely low and even if you tell me that you outperformed it by 5 times...not impressed at all by that.

Is it good based on a fundamental model...Yes, I can give you that.

Is it good based on a technical model...Not at all.

Does it outperform the average...Well, yes since the S&P 500 is an average it does that but regardless it is not a good performance...at least in my opinion and based on my investment standards. You should never judge your portfolio by the outperformance of an index...it does not make sense (unless you invested in all the constituents of the index which would be less than smart).

To answer your first question:

No, never. A novice investor will never outperform the market and definitely not on a consistant base but since you plan to use the model you mentioned you won't do it alone but you seek the assitance of a third party which will give you access to that model.

Any sound company who has a strategy in place that really works will NEVER give anyone access to it. That would be equivalent of The Coca Cola Company giving you their recipe for coke...will NEVER happen. Any models made available, either for a fee or free, are likely not worth it.

In the end it really comes down to what you qualify as a good return and what you are willing to accept.

There is no right or wrong investment strategy just a good and bad one and the definition of good and bad is up to you.

Thank-you for your informative and very helpful response!