Relative strength is one of the tools that we use to decide which funds will give us good returns on our investments. So how does relative strength apply to picking winners in a March Madness bracket? Tom will explain just that in this informational video. Relative strength can in fact give you the edge when it comes to investing and when trying to pick winners in this year’s tournament.
In this video Tom uses two relative strength matrices that were produced by Dorsey Wright and Associates. One uses data compiled from the yearly college basketball tournament over the last 27 years. The other is an example of a typical company retirement plan. The concept that Tom explains is the same on both charts though. Both charts show the relative strength of what they are measuring. So you get the relative strength of the different seeds in the March Madness bracket, and the relative strength of all the funds in the retirement plan. Whether we are talking college basketball or investments we obviously want to concentrate our picks or assets in the area with the best chance to win.
One thing that relative strength does not do is tell us what will go up or down the most. It simply measures strength and it is RELATIVE. A strong score indicates that in a good market the fund is likely to do well. Think of it as a #1 seed in the college basketball tournament. In a sideways market, funds with strong scores are likely to do better than most. In a bad market, funds with a strong score will also probably outperform others. However this doesn’t guarantee it will be making money. This is all relative, that is the important thing to remember.
Make sure to tune in and watch this video. It will definitely help you understand how we use relative strength to invest here at Mullooly Asset Management, and it might even help you to make some good picks on your bracket this year!