It was almost a year ago when we announced that Rob, Andrew and I had been accredited as Portfolio Managers. This was a huge achievement for us. The educational requirements, and the approval process we had to undergo, were both extensive and rigorous. Perhaps because of this, less than three percent of advisors in our industry have attained this designation.
Why did we change to this new platform?
We already had one of the largest and most successful investment practices in the nation. We weren't being forced to go down this road. Our motivation stemmed from our increasing frustration with the “Buy and Hold” investment approach our industry had been preaching for the past 30 years. It wasn’t working.
One of our strengths as a team is that we continually challenge accepted practices to discover better ways to assist our clients to achieve financial success. Most investors are aware that stock markets over the last 15 years have generated mediocre returns with several large, painful drops along the way. We wanted to find a better way to invest in today's markets and we realized it would require a creative new framework that would allow a more proactive approach.
How has our investment strategy changed on the new platform?
The strategy that we now employ is based on a methodology called relative strength. In a perfect world, this approach would tell an investor to be invested in the stock markets during upward trends, then tell them to shift to more conservative investments when markets begin to trend downward. Relative strength recognizes that it is sometimes better to simply remain in cash when a significantly negative trend develops for equities. Why take a 30% hit to the value of your assets if you could possibly avoid it?
Another key benefit of the Discretionary platform is our ability to employ the strategy simultaneously across parallel client investments - whether the individual account is large or small. This "fairness policy" is a huge enhancement.
Relative strength as a concept is not new, but it does fly in the face of the traditional approach used within the investment industry. The most common approach these days is to rebalance by selling on strength and investing those profits in weakness. Instead, relative strength strives to invest in strength at all times. Avoiding weakness is one of the primary strategies employed to manage risk.
Can relative strength be used to choose specific investments?
We believe the relative strength approach is a much better way to choose individual investments.
When choosing specific stocks, for example, we buy the strong positions and hold them until they begin to show weakness versus their peer group. When a position sags far enough in the strength rankings, we sell it and replace it with one that is showing greater strength. This process forces us to allow winning positions to run, and to act quickly to weed out weak performers.
A better approach to managing money
Now that we have been on the Discretionary investment platform for almost one year, we are convinced of its vast superiority to our former approach. It provides a nimble, objective investment regimen - and fairer treatment for all clients. Each month we are incrementally improving our processes and we are still pushing to find better ways to enhance returns or reduce risk.
We continue to believe this is a better approach to managing our clients' investments.