Our Investment Philosophy
Today people over the age of 55 face economic conditions much different than previous American retirees. The media attempts to make parallels to past decades. But this situation is different – much different. The new economy is wired in a completely different way and the new rules are not in your favor.
When you look at some of the worlds greatest investors, Warren Buffet – Peter Lynch – Sir John Templeton – George Soros – Jim Rogers, they all have two things in common. First, they all have their own investment system. Each one is different, but this is what they do have in common. They have trust and confidence in their system, even when it makes them “look stupid”.
Remember back in the late 90’s, when all the ‘smart money’ was going into tech stocks, before the tech bubble burst? Tech stocks were never part of Buffet’s ‘system’ so he never owned any of them. And for a while he “looked stupid”. The media had all kinds of articles (and magazine covers) attacking him for being out of touch with the new economy, someone past his prime and ready to be put out to pasture.
Where is Buffet today? Right back on top! Why? Because, he has…
Trust and Confidence In His System
Second, they avoid large losses; look at the chart to the left. On the far right, a 50% loss takes a 100% gain just to get back to break even. Impossible? No, but almost. Now look at the far left. A 10% loss only needs a 11% gain to get back to break even.
The world’s greatest investors know the true secret to investing success is…
Avoiding Large Losses! Asset Allocation Doesn’t Work.
Pie Chart Investing Doesn’t Work.
All the so called ‘experts” (including most Financial Advisors & stock brokers) tell you to “rebalance” your investments. Periodically selling some of your winners and adding that money to your losers.
What these ‘experts’ are really telling you is that they don’t know which areas of your account are likely to outperform or underperform, and they don’t want to know.
When you think about it, rebalancing is buying what has done worst and selling what has done best.
Most financial advisors and stock brokers aren’t trained to effectively manage investments, and may in fact do just as well for their clients by simply re-balancing every few months. Personally, I think it’s a shame that this is how most people in our business think they can justify their fee!
Rebalancing can actually hurt your account’s performance over time, as it perpetually adds money to investments that are producing poor results! While at the same time taking money away from investments that are producing profits. Where’s the logic to this?
Can you imagine what would happen if you managed a business in the same way that traditional ‘pie chart’ asset allocation would have you do? Let’s say that you run a Golf ProShop and Titleist golf balls are outselling Maxfli’s 2 to 1. Would you rebalance your inventory so that you
spent more money increasing your inventory in Maxfli’s and reducing your Titleist inventory? What kind of results would you expect from that?
Remember this. Money doesn’t disappear. It always goes to where its in highest demand.
Our Supply & Demand System®
Economics 101 says that if demand for a product is strong, prices will tend to go up. If demand is weak, prices tend to go down.
Our Supply & Demand Investment System® continuously measures demand of various asset classes and only puts money to work in high demand areas, while avoiding (or selling) weak demand areas.
The average adviser will tell you that portfolios should be diversified and periodically rebalanced — it’s the investment equivalent of not putting all your eggs in one basket. They reject the idea that portfolios should also be actively managed. Because of their near-religious belief that markets will eventually deliver the returns that they have in the past, they tell their clients to “be patient” and wait out any market turmoil (even when it lasts over ten years).
We disagree. Instead of sitting on our hands and hoping the market will eventually deliver the returns our clients need, we respond to changing economic and market conditions by modifying our portfolios asset allocations accordingly — first, to minimize any risk to their assets, and second, to take advantage of opportunities to increase their returns. And unlike other firms, our Investment Team isn’t limited to specific asset classes — they’re free to invest in whatever offers the best opportunity, so long as they stick to the risk levels set by our individual clients.