Stewart Wilson's Genetic SOS
for Fidelity Sector
Automatically Select the Best Performing of Multiple Strategies
Stewart Develops a Genetic Algorithm for Designing
Fidelity Sector Fund Strategies
Stewart Wilson's effort to develop a genetic
algorithm for selecting a set of 12 Fidelity sector
funds as members of a SectorSurfer Strategy was
first reported in our
January 2017 Newsletter. About a year earlier,
Stewart contacted us about experimentally developing
a genetic algorithm to pick funds from a set much
larger than the 12 funds a SectorSurfer Strategy can
hold, such as the 40 Fidelity Select sector funds.
The purpose of the genetic algorithm would be to
automate the fund selection process and completely
remove any human-induced hindsight selection bias.
Forward-Walk Progressive Tuning is employed, a SectorSurfer
critic would be on reasonable grounds to ask
"When did you pick those funds?" Answering
"today," results in the critic saying "Obviously you picked
those funds in hindsight knowing they would do
well." While it is possible to carefully select a
set of strategy funds that have no hindsight bias (by
including representatives of all market sectors), a
genetic algorithm simplifies the problem by
inherently eliminating hindsight selection bias and the associated risk of future
underperformance associated with it.
Stewart and I quickly found we had significant
compatibility problems between SectorSurfer's
Windows-based server and programming languages
versus Stewart's Linux operating system and Lisp
programming language (more common among academic
researchers). Even simple file sharing was a problem.
However, we were mutually determined to proceed and
agreed that Stewart would first have to recreate
SectorSurfer's fundamental momentum and differential
algorithms by using little more than emailed
descriptions. Only then could he begin to layer his
genetic algorithm for evolutionary fund selection on
top. Over the course of about a year, Stewart's work
eventually began to bear fruit as illustrated by individual
Strategies of this portfolio, each of which was designed by
his genetic algorithm and imported into
SectorSurfer to confirm the performance indicated by
This Strategy-of-Strategies includes
Strategies that were created (funds selected) by
Stewart's genetic algorithm in late 2016. Although
initially created without the benefit of
Forward-Walk Progressive Tuning, each of these
underlying Strategies have had this feature enabled
with the corresponding
BornOn Date of 1-4-2010 and thus will be able to
automatically adapt to future changes in market
dynamics. Note: At the SOS top level, StormGuard
is disabled because it was deemed to be the
responsibility of each underlying Strategy.
Stewart's work was both proof-of-concept and
inspiration for the 2018 development of our Merlyn.AI genetic
algorithm, which takes this work to the next level,
where (1) strategies incrementally evolve monthly;
(2) StormGuard Armor, Bear Market Strategies and
Forward Walk Progressive Tuning are fully
integrated; (3) portfolios of Strategies can be
created and managed; (4) larger sets of ETFs and
mutual funds are easily managed for sector and asset
class strategies; (5) exclusion of unsuitable funds
is automatic, and (6) the proper files and
connections are made so that it can integrate
seamlessly with our SectorSurfer and AlphaDroid
We are very happy to now have Stewart onboard as our AI
Science Advisor to help us get our Merlyn.AI
technology right and ponder future improvements. We are also happy (in hindsight) for
the system compatibility problems we initially had
because the independent recreation of SectorSurfer
in Lisp by a professional and academic of Stewart's
stature provides serious validation of
SectorSurfer's underlying concepts and algorithms.
What is a Strategy-of-Strategies?
A SectorSurfer Strategy selects the trend leader
from among a set of candidates — and for a
the candidates are a set of Strategies instead of a
set of stocks or funds. Since each of the SOS
underlying Strategies have already been maximized
for performance, there is generally only minimal
further upside performance that can be extracted.
The primary benefit of an SOS is to make sure that
you stick with the best performing of the candidate
Strategies and steer clear of the others.
For example, if the Strategy you own gets a "flat
tire" for some period in the future because you just
didn't quite have the perfect set of candidate
sector funds, it's quite likely that one of the other
candidate Strategies will still be performing well
and will be automatically selected for you by the
Strategy-of-Strategies. Thus, a
Strategy-of-Strategies is a form of insurance
designed to reduce future risk of Strategy
Instructions for building your own
Strategy-of-Strategies can be found HERE.
What's This ?
Although implementing a typical
Strategy-of-Strategies would require using 4 to 5
normal Strategies and have a
corresponding subscription price of $40 to $50 per
month, a Master SOS can be
imported into your account for a fraction of that
cost. However, a Master SOS is priced higher than a
standard Premium Strategy. The X factor is specified
in the left column of the Select-a-Strategy popup
and of your Strategies list where "Paid 3x"
indicates that it will be charged at a rate 3x
that of a normal Premium Strategy.
Strategy-of-Strategies is composed of multiple
candidate Strategies, of which only the trend leader
among them is selected to finally determine which
one fund will be owned next month. All of the
Strategies are generally related in some way and are
intended to have (or allow) a degree of redundancy
in their construction because the job of a
Strategy-of-Strategies is not to choose between a set
of ideally uncorrelated assets, but rather to choose
the Strategy best formulated for current
market conditions as evidenced by its current
Each of the underlying Strategies is configured
with a set of up to 12 funds, each representing a
different slice of the market; sector, country,
commodity, or asset class. SectorSurfer's algorithms
determine which fund is designated best-of-breed
based on its trend leadership. The yellow line on
each chart plots the performance of the strategy,
which owns only the designated best-of-breed fund at
any given time. This is True Sector Rotation (or
serial diversification) and is a powerful investment
ally best appreciated through its performance.
Stewart Wilson's Genetic SOS (w/
for the SOS
SectorSurfer Strategies typically produce only about four trades per year, and Forward-Walk-Progressive-Tuning,
the industry gold standard for backtesting, has been incorporated.
The SOS chart (top-right) plots the performance of
each of the contributing strategies in grey, the
S&P500's performance in white, and the
Strategy-of-Strategies in the multi-colored Painted
Path format where each of the colors indicates which
of the Strategies was selected at that time.
As previously indicated, the Strategy-of-Strategies
purpose is not to extract additional great returns, but to
act as a form of insurance designed to reduce the
risk of sub-performance in the future should one of
the Strategies get a "flat tire" for a while.
There's a Better Way to Select Funds
Level the playing field with Wall Street by putting
SectorSurfer's Secret SOS to work for you.
We'll do the hard work ...
while you go have a life.
Underlying Strategy IDs
Stewart Wilson's Genetic Strategy-of-Strategies
How to Import a Master SOSTM
are designed and maintained by SumGrowth Strategies
and are only available for importing into
your My Strategies page through the
Select-a-Strategy popup window. Click the
icon to open the Select-a-Strategy popup window. In
the top-center of the screen, you will see a series
of checkboxes (as shown to the right). Click the
checkbox to "Include Master Strategies," and
un-check the others to clear them so only Master SOS
The partial listing to the right shows the first
five Master Strategies: three for ETFs, two for
Fidelity funds, and one for Vanguard funds. Each of
them indicates they are Premium Strategies with a 2X
cost factor - meaning the subscription billing
software will count them equivalent to two Premium
Strategies. Under the 30-Strategy subscription, the
price breaks that occur at both 5 and 15 Strategies are
correspondingly honored. Under the 10-Strategy
Legacy subscription, you must have 8 or fewer
Strategies in your account to import a Master SOS.
Underlying Strategy Copies?
If you desire to import
any of the underlying Strategies for further
experimentation or analysis, their Strategy-IDs are
listed to the right, but are otherwise not needed for
Master SOS operation.
( See: How to Add this Strategy to Your
( See: How to Make
Strategies, LLC , its SectorSurfer service, and its Strategies are not associated with or sponsored by
The Vanguard Group, Fidelity
Investments, any ETF sponsor, any brokerage, nor any of their
related affiliates. SumGrowth Strategies is a privately held company
with a mission
to help individuals improve their retirement plan prospects by providing state-of-the-art automated
algorithms for investment analysis / advice.