What is systematic investing?

A Rules-Based Approach to Investing

Systematic investing is a rules-based approach of making investment decisions. It follows a simple principle: “If A happens, then do B.” These rules are applied consistently, removing human emotion from the equation.

At its core, systematic investing uses:

• Algorithms and computer models
• Quantitative analysis i.e. using data analysis to make investment choices
• Predefined investment rules

This approach enables investors to construct portfolios that follow clear logic and statistical evidence.

How Stratiphy Uses Systematic Investing

At Stratiphy, we apply a systematic framework to help investors build customised strategies that match their goals, risk appetite, and values.

Our strategies use:

• Quantitative methods, such as analysing company profits or share price trends, to evaluate investments
• Techniques to build your investment portfolio with risk management
• User preferences, such as defined sectors and risk levels

Systematic Investing vs. Copy Trading

With the rise of social media, many investors are drawn to copy trading — the idea of automatically mirroring the trades of a “successful” investor, for example Cathie Wood.

There is a big difference between systematic investing and copy trading. While both methods offer automation, they vary significantly in how decisions are made and who is in control.

Decision making:

• Systematic investing is based on your rules and preferences
• Copy trading is based on another traders decisions

Transparency:

• Systematic investing gives full visibility of your strategy
• Copy trading gives limited visibility of the strategy or rationale

Control:

• Systematic investing offers a lot of control so you can adjust at any time
• Copy trading requires you to follow another’s trades automatically

Systematic Investment Methods

Systematic investing can incorporate a variety of investment styles and analysis techniques to generate investment signals. Two core methods that underpin many strategies are fundamental analysis and technical analysis.

📊 Fundamental Analysis

Fundamental Analysis checks if a company is financially healthy, for example, by reviewing its profits and the conditions of the market in which it operates to see if it is worthwhile investing in relative to other companies. It tends to involve manual work, it is difficult to perform automatically or at scale.

This approach attempts to quantify the intrinsic value using a variety of techniques, such as:

• Cash flow analysis – forecasting future cash generation to understand how much money a company might make in the future.
• Multiples analysis – comparing valuation ratios (like Price-Earnings ratio) to industry peers.

📈 Technical Analysis

Focuses on price trends and patterns from historical data. Technical analysts believe that market behaviour tends to repeat itself under similar conditions. It tends to be possible to automate technical analysis, and perform it at scale. Techniques include:

• Momentum: Identify the companies whose share prices have risen or fallen the most over a period of time, based on the assumption that this is part of a longer trend.
• Moving Averages: Takes the view that the short term average will tend to revert to the long term average, helping you spot investment opportunities.
• Moving Average Convergence Divergence (MACD): This is a derivative of the Moving Averages approach, and that gives more weight to recent prices than older observed prices.

Both types of analysis have their strengths, and at Stratiphy, we often combine elements of each to construct more resilient, adaptive strategies.

How Systematic Investing Is Used Within an Investment Strategy

Systematic investing forms the backbone of many investment strategies, including those offered by Stratiphy.

Here's how this works in practice:

1. Defining the Rules
   First, the strategy sets clear criteria for selecting investments. For example, using a momentum style of investing with a medium risk level.
2. Constructing the Portfolio
   Once qualifying investments are identified, portfolio construction techniques are used to allocate capital efficiently. This might involve balancing sector exposure, managing risk levels, and applying diversification to reduce volatility.
3. Ongoing Monitoring & Rebalancing
   The strategy doesn’t stop at portfolio construction. It regularly monitors market data and rebalances the portfolio based on the defined rules, ensuring it stays aligned with your preferences and risk appetite over time.

At Stratiphy, we believe everyone should have access to the same tools and techniques used by professional investors.

Ready to build your own strategy?Use Stratiphy and see how our simple approach can help you grow your money confidently.

When investing, your capital is at risk. If you are unsure about the actions you should take, you should consult a professional financial adviser.