Turn your computer into a mutual fund goldmine! So goes the catch line on Monocle Systems home page.

About three years ago, Tony Sagami, founder of Monocle Systems, gave a lively presentation to the APCO Financial SIG. Several of us took him up on his great user group pricing and bought the software and subscribed to the data service. Due to the group interest in mutual funds, a Monocle Mutual Fund SIG was organized.. Walt McGinnis and myself are co-chairs.

Monocle is a mutual fund analytical software program for Windows. It is one of the easier to use financial analytical programs available. It includes automated trading systems show you what the optimal move is following your personalized trading program. The mutual fund’s daily net asset value is downloaded off the internet.

The Monocle database is organized as a spreadsheet, with the names of the funds down the left-hand column. Adjacent columns display values such as one-year returns, three-year returns, beta, alpha, Sharpe ratio, Treynor statistics, and so on. The statistics are of three types: reward, risk, and both-that is, risk-adjusted rewards.

Reward statistics include historic fund returns, both absolute and as measured against benchmark indexes such as Nasdaq or the S&P 500. Risk measures assess fund volatility and how closely the fund follows the moves of the market. These measures are mathematically sophisticated, but the software uses plain language. The "ulcer" index, for example, is a measure of the irritation you might experience in waiting out the deep valleys in a fund's performance. A historic record of a fund's "drawdown" shows you the greatest percentage loss in a fund over a stipulated period of time. It is a worst-case scenario that immediately makes sense to novices learning the program.

In Monocle, fund-trading decisions are driven by technical timing tools long familiar to stock traders: moving average crossovers, trend line penetrations, and swings of relative strength. The charting package will display these indicators; charts can be marked with arrows to indicate buy and sell points. The dynamic allocation module will back-test trading strategies to see how well they would have fared in the past. 

Back testing is common in stock-trading software. But this program differs from stock-trading programs in two important respects. It tests not only single trading vehicles but also portfolios of mutual funds. And it takes into account the rules you need to follow to minimize your transaction costs. For example, there may be a requirement to stick with a newly purchased fund for 30 days. Monocle takes these rules into account in testing trading systems, so you don't come up with a strategy you cannot use in the real world. If you need help getting started on strategies, the program comes with an example of a trading system. 

Monocle II is fast and intuitive. The manual is helpful. The program itself is essentially a short course in fund evaluation and trading. The program's purpose is to help you stay invested in the winning funds while they are winning, and then switch funds to keep on winning. The program cannot make these judgment calls — you must. But it can provide the tools you need to do what is necessary: identify a sleeper, beat the market, and avoid that inevitable day of doom.

One of the strongest investment strategies is Sector Rotation. This strategy shifts investment into the area of the market now performing the best. We say over the last year and half that techs had a very strong run up and run down. By being flexible and moving with the market, Monocle users try to be in the right place at the right time. If well executed, one can capture most the upside and miss most of the downside. The difficulty of this strategy is it takes some powerful tools, like Monocle and a daily dedication to monitoring and executing on one’s system. Getting familiar with Monocle can be done in a couple of weeks. Really knowing the program is a much longer process and something all our SIG members are still learning. 

Monocle Pricing Info: A $15, 30-day trial is available. This includes software, manual and shipping. Monocle II for Windows CD (Windows 95/98/2000/NT) is normally $500 (one-time charge). Tony Sagami has offered APCO members one-half off the normal charge.  

Users will also need to subscribe to Monocle’s daily data service for $75/quarterly or $240/yearly

System requirements
Like all the latest and greatest software, the more system power and faster Internet connection, the better one's results. Does anyone who is serious about managing their money, and using sophisticated software and extensive daily download have a system older than three years? 

If you’re interested, please be our guest at an upcoming APCO Monocle SIG.  We meet on the first Wednesday of each month at 7 PM in the APCO Central Park mall Resource Center.