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The Big What If: Backtesting from Cherries


Would you have chosen to drop out of college if you knew your rock band would fall apart before your first gig? Would you have kept in touch with your best friend from 3rd grade if you knew she was going to become a billionaire inventor? Would you have bought that house if you knew that a drummer with a loud motorcycle and collection of spooky garden gnomes would move in next door?


A lot of decisions would be easier if we could see into the future. We can’t help you there. But sometimes, information from the past is enough to help predict results. That’s where Cherries Backtesting comes in. Backtesting allows you to create an optimized portfolio today and then simulate what would have happened if you’d created a portfolio one year ago*.


How Does Backtesting Work?

Every Cherries portfolio takes into account your choices regarding sectors, risk level, initial investment volume, and more. Meanwhile, the Cherries database includes up-to-date price information for every stock traded on NASDAQ, AMEX and the NYSE dating back to *April 1st, 2017. With so much information and so many factors at play, each Backtesting simulation is different (so you can be sure it wasn’t set up in advance). After you’ve run the Backtesting feature, you’ll get the results in an interactive graph.


What Information Will I Get?

Once your simulation is done, you’ll be able to see how your investment would have paid off if you’d started your portfolio sometime in the past. Most importantly, you’ll be able to compare it to standard economic benchmarks from the same period and see how it would’ve measured up. Keep in mind that an optimized portfolio is designed to be held over time. There are no guarantees that any portfolio will be the best possible investment in any particular time period, but we’re confident that it will stand up to most economic benchmarks.


So How Should I Use Backtesting?

We think asking “what if?” is fun on its own but there are also a lot of ways that Backtesting can be a useful tool for both newbies and more experienced investors. Whether you’re trying to understand the market, learn new skills, or decide on your personal investment strategies, Backtesting can help you gain new insights in a number of ways:

  • Compare strategies - Cherries portfolios can take into account a number of different factors, including sectors, diversity levels, risk preferences, and varying investment amounts. It’s also up to you to decide how long to hold on to your portfolio. You may decide to go relatively high risk and not hold on very long or choose a very stable portfolio and hold it for years and years. Each strategy will have different advantages and you can use Backtesting to help get an idea of what each one will look like in practice.

  • Evaluate risk levels - You may think of yourself as a big risk-taker in general, but money can be very different. Before you actually invest, see what the results of different risk levels look like. What some people consider low-risk may be high-risk for you personally, especially if you’ve already spent most of your savings sky-diving or bungee-jumping.

  • Understand differences between sectors - As a general rule, diversity in a stock portfolio is a good thing. However, there are times when one sector is doing particularly well and another particularly poorly. You may be tempted to invest in just one or to exclude a few. Backtesting gives you the chance to see how that strategy will perform and help you understand how sectors of the stock market interact.

  • Get a confidence boost - Investing is intimidating, especially if you’ve decided to personalize your portfolio. Backtesting can give you that bit of encouragement you need to put your strategy into play. When you see how well your portfolio would have withstood the ups and downs of the market in the past, you can trust that it can take on the future.


*Cherries is currently in the Beta stage, in future versions there will be an option to Backtest further into the past.


What is Cherries?​

Cherries in an innovative platform for the construction of personally optimized stock portfolios. Its cutting-edge algorithms are based on groundbreaking statistical and mathematical models.

Cherries was developed by TFI Ltd.

© 2019 by Cherries