Portfolio Wisdom Investment Methodology

Better Investment Methodology – Improve Risk-adjusted Investment Returns.

Please click here to see a theoretical historical comparison between our Portfolio Wisdom Standard Model, the S&P500, the Blackrock Global Allocation Fund, and an appropriate Morningstar Index.

Dale Beals developed our proprietary diversification and risk management methodologies to substantially reduce the chance of large losses in your portfolio. Our approach is based on the concepts of Dynamic Asset Allocation and Risk Parity. It is much less volatile (risky) than the models you often see used by large brokerage firms or other advisors. Essentially we have taken traditional diversification and asset allocation to the next level by improving on two major shortcomings with Modern Portfolio Theory:

  1. Asset class behavior changes drastically over time and its returns are not normally distributed. Everyone knows this, yet Modern Portfolio Theory, as currently implemented by many brokerage houses and financial planners,  assumes that asset class behaviors  will be similar to those of the last 15-20 years.
  2. Correlations between asset classes can change drastically during times of panic. In other words, during a stock market crash, bonds, gold, real estate and other asset classes may experience panic selling, so that everything goes down at once. Everyone has seen this happen, yet Modern Portfolio Theory, as currently practiced by many, assumes that asset class correlations will stay constant over time.

Mr. Beals developed his methodology to use the benefits of MPT without relying on those false assumptions. Instead, our allocations objectively change as the markets change:

  1. When one asset class becomes more volatile and risky, we automatically, and gradually, reduce the portfolio allocation to that asset and rebalance those funds among the other asset classes. Also, when market price movements move our portfolios away from the target allocations, we rebalance the portfolios. So, our portfolios breathe with the market.
  2. If multiple asset classes begin to fall at once, we have risk management mechanisms in place to reduce allocation to the falling assets gradually, or quickly, as necessary to preserve capital.

Our Dynamic Asset Allocation is more akin to the approach used by some major university endowments, than what is normally available to individual investors.

Why is This Critical to Your Financial Future?

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?

Many brokers don’t do this work because they are not paid to spend much time after the sale 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 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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