Investment Approach

Portfolio Optimization

Portfolio Optimization is a sophisticated approach to Asset Allocation that is designed to balance the risks, returns and correlations of an investment.

Many of our clients were familiar with “diversification” before they started working with us, but they were used to diversifying between companies or asset classesand were not familiar with diversifying between investment strategies.

While each of the following strategies have strengths and weaknesses, they tend to perform differently during similar market conditions which is what true diversification is all about.

Tactical

This strategy uses market signals to help us exit the market and move to cash when the probabilities are higher that we will experience a larger loss and be in the market when the probabilities indicate a greater chance that the market will continue going up. They tend towards long term or intermediate term signals and will generally stay invested a majority of the time.

Trading

This strategy uses short term market signals and utilize different segments of the stock, bond, or alternatives markets. They rotate between what they are invested in and cash and they may use leverage when they are invested. They tend to look at short term indicators, often daily or weekly and trade more often.

Factor

This strategy does not trade very often and look at stocks that have certain characteristics such as high quality, high dividend, low volatility, momentum, etc… These tend to only trade when individual stocks no longer meet their criteria or another stock ranks higher in that factor and replaces the old stock. Even though most people are not aware of it many index funds fall into this category based on size or capitalization factors.

Fundamental

This strategy invests in individual stocks that the analyst believes have strong fundamentals and hold the potential for long term appreciation based the strength of the company.

If you are interested in finding out more about how our investment approach could fit with-in your portfolio or would like a second opinion on your current strategy.

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