Our Practical Approach to Tactical Investing
How we think about investing is practical
What we do about it is tactical
Practical
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Practical thinking keeps us focused on the pursuit of our goals within the confines of limited choices.
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We strive to evaluate current conditions as they are – rather than what we think should be or fear might be.
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We don’t rely on predictions, but we do apply decades of practical experience and objective data to form opinions, exercise judgment and plan contingencies.
Tactical
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Our hierarchy of tactical decisions flows from asset allocation and risk management to security selection based on relative performance and anticipated portfolio contribution.
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Our portfolio is actively managed to allow for multiple contingencies with the liquidity to respond to new information and changing trends.
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We hold ourselves accountable through transparency and performance monitoring.
Rather than implement a static buy-and-hold strategy, we maintain a dynamic process that is constantly evolving. We primarily seek to add value by:
1. Participating more in advancing than declining markets.
We believe markets are cyclical - asset classes go up and down in extended trends (lasting months, often years).
We also seek to recover from downturns more quickly than our benchmark; reducing the impact of “sequence of returns risks” and helping investors tolerate and potentially capitalize on volatility.
2. Market Leadership is also cyclical – sectors, strategies and geographic regions move in and out of favor.
If we can de-emphasize weak areas while adding and/or maintaining exposure to areas of strength, our portfolio ends up ahead.
3. Current conditions often diverge from long-term trends.
If we can participate more in advancing than declining markets, we end up ahead.
We also seek to recover from downturns more quickly than our benchmark; reducing the impact of “sequence of returns risks” and helping investors tolerate and potentially capitalize on volatility.
3. Current conditions often diverge from long-term trends.
Most financial plans use long-term performance history and assume stocks, bonds and cash will earn similar returns to their long-term average. But over periods as long as 10-years, actual annualized returns are rarely consistent with these average results, creating significant risk to financial outcomes. To mitigate the risk of outpacing benchmarks but earning a return that is insufficient to meet return objectives based on long-term performance-based expectations, we:
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Base asset allocation decisions on a combination of long-term historical performance, correlations, and an assessment of current conditions (risk and return potential)
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May invest in a broad range of asset classes including Stocks, Bonds, Precious Metals, REITs, and Commodities
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Maintain the flexibility to raise cash and hedge the portfolio using options strategies