Titan guide · 7 min read

Optimization in Titan

The Optimization feature shows you the distance between the portfolio you have and the one that would come out of applying your own rules to your own valuations. It is a simulation you run, and it is the screen where everything else you have written in Titan comes together.

What it does, and what it does not

This matters more here than anywhere else in Titan, so it goes first.

Titan does not advise you. What this screen does is calculate the combination of assets that offers the highest potential return, using the information you entered yourself and staying inside the limits you set in your investment plan. Running the simulation is your decision, and you are solely responsible for whatever you decide to do with the result.

The steps it shows you are not buy or sell recommendations. They are the arithmetic of moving from one point to another according to the data you provided.

Change your target prices or your limits and the result changes with them. The feature knows nothing about the future. It knows what you told it.

How the engine works

It is mathematics, and the variables are yours.

The model takes the target prices of the assets you have analysed at a given horizon, ranks them from highest to lowest potential return, and assembles the portfolio with the highest potential return for that horizon within your constraints.

What you need for it to be useful

There are two halves to the screen, your current portfolio and the optimised one, and each half needs something different.

To assess what you already hold, those positions need theses with target prices on them. Without that, your current portfolio cannot be measured against your plan, and the screen will only be useful for looking at the optimised side.

To find out whether there are better options, you need theses on assets beyond the ones you already hold. With only your own holdings analysed, you can see how well they fit your plan, but there is nothing to compare them against.

Neither half needs the thesis written out in full. Creating it and setting the target prices is enough.

Running an optimization

Three decisions before you press the button.

1. The time horizon

Which horizon you pick decides which of your target prices gets used, and therefore which upside or downside goes into the calculation.

An asset with no target price at that horizon cannot make it into the resulting portfolio, because its return counts as nothing.

So when something you expected to see is not there, it is probably one of two things: either it has no target price at the horizon you chose, or its potential return did not beat the alternatives.

2. Cash, and leverage

If you leave cash out, the only money in play is what your current positions are already worth. That amount is redistributed, as the calculation works out, across the assets you gave the engine to work with, and not only the ones you already hold: it can exit a position entirely to move into something you have analysed and never bought.

If you bring cash in, the slider lets you choose how much of it to use. And if you allow leverage, the slider starts from using 100% of your available cash and goes up from there, as far as the limit you set in your investment plan.

That behaviour is the point rather than a side effect. It is what stands between you and putting money into the stock of the moment, without having analysed it and without it doing anything for your long-term plan. Joel Greenblatt used to tell his students that if they did the analysis well the market would eventually agree with them, while carefully not saying when. A tool that refuses to deploy cash into something you have not analysed is a tool built for that kind of patience.

3. Which assets are considered

Then you choose which assets go into the calculation. Include everything you have fully analysed, so the engine assesses every alternative you actually have available.

You do not need to filter out the ones you think look bad. If an asset offers a potentially negative return, the engine discards it by itself in favour of the alternatives.

Reading the result

Press optimize and, in a few seconds, you get the comparison: your current portfolio on the left, the optimised one on the right.

1. Portfolio value and available cash

The value of your assets and the cash beside it. The two together are the total you see on your Dashboard, and both figures move depending on how the two compositions differ.

2. Potential returns

At 1, 3 and 5 years, in your base currency and as a percentage, with the horizon you selected in bold.

Worth being precise about what these numbers are. They are exact, in the sense that they come straight out of the calculation, but they are not guaranteed. They rest entirely on your own analysis, and a valuation is an estimate by definition. What the block lets you do is compare what one composition might produce against another, on your own numbers.

3. Composition by asset

The pie chart of each portfolio, side by side.

4. The steps from one to the other

It uses the same two-column layout as the rest of the screen, but it should not be read as a comparison. The left side is sales and the right side is purchases, and both are parts of the same path. Expand it and they lay out in a single column: sales first, then purchases.

Each step tells you how many shares are involved and why it appears. The reasons are concrete: a full exit from a holding because there is no thesis covering it, or from another because you excluded its country from the ones you invest in.

To be clear about what this block is: it is the logical path from one portfolio to the other, not a set of instructions. Whether you take any of those steps, and how far, is your decision.

5. Distribution by sector and country

The last block, with a switch to move between the two views and compare how each composition spreads out.

How to use this screen

The purpose is to give you a reference: where you are, how far you have drifted from your plan, and how coherent your portfolio still is with what you set out to do.

It is deliberately not built to tell you what to buy or sell, and that is not caution for its own sake. Titan exists so that private investors manage their portfolios with control, understanding what they own and why it is there. If an investor followed a simulation blindly, without understanding the reasoning behind it, they would be giving up exactly the thing the tool was built to protect.

So treat it as the mathematical support you take decisions on, use it often, and take those decisions yourself.