No, this discussion is not about a tiebreaker in a tennis match, although with a similarly intended outcome.
Reader David emailed recently and pointed out that in the StatSheet some of the mutual fund/ETF rankings (as per my M-Index) were showing a tie.
What should he use as a tiebreaker? Should the M-Index rankings be shown not only as a whole number but also with decimal points to make a clear distinction as to the pecking order?
Since this is not exact engineering science, decimal points are not needed. If I find several funds/ETFs with the same M-Index, I look at all other momentum figures of the tied funds as well. I compare 4-wk, 8-wk, 12-wk and YTD. Ideally, I want to see positive numbers in all columns.
With the recent market pullback, that may not be possible, so my main focus will be on the 4-wk number. Say, I have 3 funds that are tied with the momentum index, but one shows me a positive 4-wk figure, that would be my preferred choice.
Why?
It tells be that this fund has either survived the recent sell-off intact or has recovered quickly, which would make it preferable over those that are still showing red ink.
The purpose here is to make a selection with as little emotional involvement as possible and to have a clear process for making a selection. As with all investments, this does not guarantee a successful outcome, but it may make it easier for you to break a tie when you encounter one such as David did.