Sometimes the term "steel man" is used to refer to a position's or argument's improved form. A straw man is a misrepresentation of someone's position or argument that is easy to defeat: a "steel man" is an improvement of someone's position or argument that is harder to defeat than their originally stated position or argument.
In this forum and elsewhere, the idea of investing in individual stocks is readily dismissed. In most cases for very good reasons:
1. Concentration of risk
2. People buy lottery tickets
3. Opens more room for behavioral mistakes
4. Track record of active managers in the long run
5. Cost, Taxes, Simplicity
However, how about the cases when:
1. A desirable fund with X,Y characteristics doesn't exist.
2. The investor is willing to follow a well researched disciplined systematic approach.
3. The strategy can be implemented at reasonable cost and sensitive to tax issues.
4. The investor has the interest, quantitative skills and time to carry on with the endeavor.
5. The main objective is to have an appropriate growth with a lot less volatility and small drawdowns.
After considering the above, the main question is will the juice be worth the squeeze?. Some other issues include:
1. The odds of outperforming the benchmark over the long term are low. But how about when adding low cost?
2. Tax Loss Harvesting becomes a lot easier.
3. One requisite is that the potential under-performance can't be a threat to financial goals. It would just suck to put time and effort into something that doesn't pan out as expected.
In any case, the strategy that I will be considering will include (Updated 5/29/19):
1. Rank stocks based on Low Volatility and "Desirable" Momentum
2. Use Russell 1000 as universe.
3. Add constrains to prevent sector concentration.
4. Daily or event based rebalancing.
I'm looking forward to hear the best arguments against embarking in this effort, specifically about the desirability of the strategy features and the tax situation.
I found the wiki section very good.
Update (6/13/2019): 3 month performance