The book, "What Works on Wall Street: The Classic Guide to the Best-Performing Investment Strategies of All Time," by James O'Shaugnessy, is an excellent resource for investors.

It was originally published in 1997 and the fourth edition is now in print

The book was written, and has since been updated, to illustrate which return factors are robust when tested over a long period of time, and, in the alternative, which fail too frequently to be used with confidence by investors.

Many growth and value factors were tested, along with others including relative strength.

The summary of findings within the book establishs a useful foundation for how you might construct equity portfolios.

The book highlights several time-tested investment themes and we’d like to cover three of our favorites over the next couple of months. Theme one: "The only way to beat the market over the long term is to use sensible investment strategies consistently. … The lack of discipline devastates long-term performance”

The ability to make rules-based investment decisions, and to do so in a repeatable fashion, is easier said than done.

It becomes far more challenging when the factors that guide your "rules" are ambiguous to begin with.

Many fundamental inputs, whether growth or value oriented, can become ambiguous over time. Accounting standards can shift, analysts can focus on top-line instead of bottom-line numbers, etc.

All of us can recall the manner in which "dot-com" companies had their numbers massaged by analysts in an effort to generate  positive opinion as the stocks were rising.

When the stocks began to fall, changing that opinion in a timely fashion was hard to do, since the data supporting the "buy" recommendation didn't change.

If an analyst says to "buy" a company that isn't making money, the simple observation that they are still not making money a year later doesn't give cause to downgrade the stock.

Market psychology can change much faster than company fundamentals, and this is why price inputs are so useful.

Price is an objective input, and the primary calculation based solely upon price inputs is Relative Strength analysis.

There is no "pro-forma" relative strength calculation that might be confused with the Generally Accepted Accounting Principals (GAAP) relative strength analysis.

Relative strength is calculated simply by dividing the price of one security by another on a daily basis, and that calculation comes to life once plotted on a chart. At any point in time, said chart can either point to a buy signal or a sell signal.

There is no gray area, allowing the practice of constructing relative strength-based portfolios to be conducted in both a "sensible" and "consistent" manner.

<i>This article was written by Dorsey Wright and Associates, Inc., and provided by Charles Tumlin, Managing Director, TLS Wealth Management of Raymond James.</i>

<i>Charles Tumlin is a Financial Advisor with Raymond James &amp; Associates, Inc., Member New York Stock Exchange/SIPC located at 2015 Boundary Street, Suite 220, Beaufort SC 29902. </i>

<i>He can be contacted at 843-379-6100 or charles.tumlin@raymondjames.com or visit our website at: www.tlswealthmanagement.com</i>

<i>Opinions expressed in the article are those of the author and are not necessarily those of Raymond James. Raymond James is not affiliated with nor endorses the author or his firm. All opinions are as of this date and are subject to change without notice.</i>

<i>The information contained herein has been prepared without regard to any particular investor's investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable (“information providers”). However, such information has not been verified by Dorsey, Wright &amp; Associates, LLC (collectively with its affiliates and parent company "DWA") or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any information.</i>