Does it ever surprise you why there are so many investment books in Barns and Nobles? Have you ever wonder why those investment experts in CNBC bother to wake up so early in the morning talking about their analysis? After all, if they are making a killing in the market, shouldn’t they be sleeping in some vacation resort in the Caribbean’s?

The only reasonable solution I can think of is: They are not beating the market; they are just saying they do so they can make money off their books or analysis reports. As a result, most of the stock picking methods and analysis are based on “experience” and lack of a solid theoretical foundation.

After taking some investment class and studying Six Sigma quality management, I am experimenting on treating the stock picking process as a process. The continuous improvement of the outcome of this process needs a theoretical basis to spawn innovative ideas. In the investment industry, the dominant theoretical foundation is the Modern Portfolio Theory (MPT).

Based on the Modern Portfolio Theory, I will start with the Markowitz analysis process and improve upon it. The results I post are portfolios selected using back-tested variants of this analysis, their expected annual return average about 20% for Large Cap Portfolio and 30% for Small Cap Portfolio.

I wish anyone who uses my posts can send me feedbacks through comments so I can use them to improve the analysis model.

To understand and use the results I post, you need to know the basic of Modern Portfolio Theory.