Summary

 
AUTHOR: MICHEL DE VOOGHT MSc.
CONTRIBUTING EDITOR: EOIN P. O’CUILLEANAIN
ISBN-13: 978-1701251915
ISBN-10: 1701251914
 

 
Many academics and experts have claimed and demonstrated that it is not possible to predict the future price of individual stocks, stock indexes, managed funds, and non-managed funds. Previously successful stock market gurus are very likely to disappoint in the future. Stock picking or fund picking is, and always will be, a gamble. The recent turmoil in the stock market caused by the coronavirus is the latest proof of the unpredictability of the stock market.
 

The SOPHIA on-line investment methodology I have developed is not based on technical analysis nor on any other method of forecasting. SOPHIA is based on logical reasoning and on the fact that the stock market is erratic. SOPHIA is an easy-to-apply quasi buy & hold methodology that history has shown would have achieved double-digit annual returns over the past fourteen years. SOPHIA would have beaten the major index exchange-traded-funds (ETFs), and other major sector ETFs. SOPHIA includes an easy-to-apply capital protection mechanism that protects the portfolio against major declines in the stock market.

The bulk of the portfolio is invested in about 100 large and medium-cap stocks. This portfolio is called the SOPHIA SET. The stocks are selected from major stock market sectors, and most stocks are quoted on the US stock market. The stocks meet the SOPHIA criteria as derived by logical reasoning. Their current stock price and their historical performance are not a consideration in the selection process. SOPHIA is a quasi buy & hold methodology with very few changes required during the lifetime of the investment. The management of the weightings of these stocks is minimal. SOPHIA manages the weightings in an entirely different manner to how they are managed in the major stock market ETFs.

Risk-averse investors can combine the SOPHIA SET with the SOPHIA proprietary capital protection mechanism which protects the original capital invested and can lock-in part of any achieved return. This mechanism uses a proprietary system of trading purchased options on one of the most popular stock market indexes, and it does not limit the upward potential of the portfolio. The cost of this mechanism is, on average, less than 3% per year for a protection level of 85% of the SOPHIA SET high-water-mark. Despite this relatively high cost, SOPHIA has beaten the S&P 500 by a considerable margin every single year over the past fourteen years. This cost can be reduced by investors who opt for a lower level of protection.

It is important to note that these options are purchased and trading these options does not involve the risk usually associated with uncovered or so-called “naked” written options. The trading is limited to a few trades a year. It is as simple as trading a stock.

It is very important to note that SOPHIA is not a day-trading system. Once a SOPHIA portfolio is established the time required to make any necessary changes can be as low as 6 hours over an entire year.

I provide a fee based updating service for those investors who want to be informed of all the changes I make in my own portfolio. Buyers of this book can request the conditions by using the contact form.

SOPHIA is certainly not the investor’s Holy Grail, but it is a very easy-to-apply methodology for novices and seasoned investors alike. SOPHIA has the potential of producing very attractive returns, with minimal risk, if combined with my very effective capital protection mechanism.

SOPHIA is ideal for cautious risk-averse investors who believe in the long term potential of the stock market, but who do not believe that the price of individual stocks or indeed the market itself can be predicted, and above all, who want to protect their portfolios against declines in the stock market. SOPHIA can be applied using any of the major currencies with limited currency risk and the portfolio size can vary from $100,000 to several hundred million $.

I developed the SOPHIA methodology and I use it in my own portfolio.

In “Back-Tested Data" and "Live Data”, I provide my performance graphs  of SOPHIA and the SOPHIA SET in a US Dollar based portfolio and a Euro based portfolio. I compare it with the performance of S&P500 (SPY) and Warren Buffett (BRK-A) and the Euro Stoxx 50.

I was born in 1947 in Bruges, Belgium, and I have an MSc. degree in Electronic Engineering from the University of Leuven in Belgium. My career includes Research & Development in Telecommunications, Product Management of Electronic Devices and Materials, and I was a co-founder of several IT company start-ups in Belgium and the UK.

My contributing editor Eoin P. O'Cuilleanain has an Engineering degree from University College in Dublin. Eoin held several senior management positions in major American companies, and he was also a co-founder of several IT company start-ups.

Michel De Vooght