Portfolio Wisdom Investment Methodology

Portfolio Wisdom Investment Methodology

Better Investment Methodology – Improve Risk-adjusted Investment Returns.

2013 0516 Portfolio Wisdom Comparative Backtests

Please look at the chart-link to see a theoretical historical comparison between our Portfolio Wisdom Models and the SPY (S&P500 ETF) from 12/31/2003 – 5/10/2013. We use proprietary diversification and risk management methodologies which substantially reduce the chance of large losses in your portfolio. Our methodology is based on Dynamic Asset Allocation … much less volatile (risky) than the models you often see used by large brokerage firms or other “independent advisors”. When your serious money is involved, we strive to be as boring as possible. Here are the model portfolio backtest assumptions for your information.

Our Dynamic Asset Allocation model does require more time, more work, and more client attention than other approaches, which may explain why so few commission-based or “fee-based” advisors use something similar. It is more akin to the approach used by some major university endowments, than what is normally available to individual investors.

What’s wrong with existing asset allocation models?

Simply put, they don’t respond correctly to changes in the markets. They allow your risk of significant loss to change as the markets change, rather than working to keep your downside portfolio risk relatively constant.

The closer you are to retirement, the more devastating a big loss is. That is why a methodology that seeks to avoid big losses is so critical. Risk management must be an integral part of the model. The asset allocation methodology must also adapt to changes in the market, so that the expected risk of the portfolio is kept reasonably close to the risk the client originally accepted. Sophisticated investors and money managers understand how investment volatility can cause you to to end up with less money at retirement time than your projections indicated.

How are we different?

You can think of our Dynamic Asset Allocation methodology as mathematically applied common sense. Rather than create an initial asset allocation for your portfolio, and then simply rebalance it for years to come, we monitor the changes in correlation, trend and volatility for every asset class in your portfolio, and make adjustments to the allocation when markets change. When an asset class, such as International Stocks becomes more risky, we reduce your exposure to International Stocks to maintain your portfolio risk (volatility) at a level comparable to the risk you originally approved. We dynamically adjust allocations when necessary, not every 90, 120, or 365 days.

splashscreenDoesn’t that make sense? 

Many brokers don’t do this work because they are not paid to spend much time working with existing clients and monitoring their portfolios. Many advisors are told (and paid) to go gather new assets and sell new products. We’ve never heard of an advisor who received an award from her company for saving clients from big losses or for helping clients achieve retirement goals. Rather, they receive awards for generating a lot of revenue for their firms (and themselves).How many people you know received a call from their advisors in 2008 with recommendations to change portfolio asset allocations (or get out of the market) because the risk (volatility) in stocks was triple or quadruple the expected equity risk when they first invested? Our clients don’t have to worry about that scenario. They know that our methodology will automatically drive portfolio adjustments to reduce their risk when markets become more volatile.

Feel free to call with any questions at 615-414-1942 or contact us.

The quality of our methodology allows us to offer something else that is unique in the industry…

Performance Commitment – We Make Every Client Money Every Year … OR ELSE!

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