As I have written once before, “we live in interesting times”
I am pleased to report that our models and strategies have been performing very well looking back 1 month, 3 months, YTD, 1 Year and 5 years. Due to the struggle in the market in the summer and fall of 2015, the 3 years’ returns are behind my targets.
While the markets continue to reach new highs valuations in both the stock and bond market has exceeded the level reached at the pre-crash high of October 2007. Just keep in mind that since 1881 average returns for all ten-year periods that began with valuations at this level have just been 3% per year.
This further means that above average returns will more likely come from active management of portfolios than from passive buy and hold. We will earn above average returns by avoiding the devastating impact a bear market can have on your portfolio and retirement income.
During the past few years, there has been a dramatic move from active management to asset allocation using index funds. While the impetus of this move has been to reduce fees, I am very concerned that many investors do not realize the risks that they are assuming.
This might be a great time to review my PowerPoint presentation on “Why we are different”. You can find the link here: https://www.youtube.com/watch?v=kyNGRwtMoEU
It has been 8 years since March of 2009, the bottom of the last significant correction in the stock market. In addition, with interest rates on the rise, bonds will not provide the same growth and protection as in the past. Therefore, a buy and hold investment strategy holds a great deal of risk to investors. It is more critical than ever to know the downside risk of your portfolio.
While there are never any guarantees, our tactical strategies will react to changes in trends, allow us to sidestep any dramatic declines and participate in the market recovery. With my models and strategies, we have a plan and there will never be a need to panic. Currently, all our models and strategies are fully invested and riding the upward wave in returns. When the trend changes, we will react to the changing dynamics.