Implementing a Tactical Approach
Why truncate both sides of the performance standard deviation curve, when there are opportunities to truncate loss potential without equally affecting gain potential? We evaluate numerous technical, fundamental, and sentiment indicators to determine risk vs. reward within the market. Through this evaluation, the aim is to reduce downside exposure prior to high-risk periods, such as the 2000-2002 Tech-Bubble and the 2008 & 2020’s Financial Crisis, while growing capital during low-risk markets.
Through the use of technical and fundamental research, we aim to identify investments that we believe have the most potential for growth within our clients’ portfolios without unnecessary or overly skewed exposure. In the graph below, tactical rotation of portfolios aim to shield against rapid compounding decline during market sell offs i.e., protect against the red line. This is where tactical strategies look to excel over typical strategic "buy and hold" risk based portfolios.
Protection of capital is a pivotal bedrock to the long-term success of wealth management portfolios. A Bear Market can have a deep impact on a portfolio. As losses grow, the return needed to break even compounds at an even faster rate. If you invested in the S&P 500 during the Financial Crisis Bear Market, you would have suffered losses of over 50%, which means you would need a 100% return in order to break even. The ability to tactically rotate within a portfolio aims to smooth the quantity and the depth of portfolio drawdowns in times of volatility… like today.