Investment Strategies

The Investment Challenge

Investors want and need predictable and consistent investment returns in order to grow their portfolios over time and to do proper income planning for retirement. Achieving these types of results is difficult since markets move both up and down and rarely in a straight line. The investment challenge is to create both positive and consistent investment returns from this volatile environment. The traditional approach to this problem is to diversify and hold multiple asset classes in order to buffer the inevitable ups and downs.

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AW Portfolios

Philosophy

We believe that active investment management is needed to achieve consistent returns from inconsistent markets. Diversification alone may damper some of the risk but it also reduces returns as it guarantees that one will always be invested in everything at all times. We believe that a more sound approach is to simply be invested in markets that are healthy and moving up and to avoid ones that are trending down. We do this by using proprietary signals that help us determine the health of each market.

Misconceptions

There are many misconceptions regarding the idea of active investing. Many think that this involves “market timing.” Our active management approach does not try to predict market moves, but rather, uses a “recognize and react” approach to identifying market strength designed to profit in bull markets and protect in bear markets. Others view active investing as risky due to the periodic changes in the portfolio. The reality is that the changes are designed to reduce risk by avoiding exposure when markets are performing poorly. Understanding these and other myths is important in making sound investment decisions.

Core Concepts

Having an understanding of how markets work is a prerequisite for building any investment strategy that provides an edge. Knowing the "why" is an important first step. We have studied market behavior and followed the research of the brightest investment minds to develop our beliefs. These core concepts provide a foundation upon which we build our strategies.

  • Boom and Bust

    Today’s financial markets are highly influenced by government policy decisions and interventions. Attempting to fix one problem inevitably creates unintended consequences resulting in boom and bust cycles. We want to be able to identify and participate in booms and protect from the busts.

  • Supply and Demand

    John Kenneth Galbraith famously said, “The only function of economic forecasting is to make astrology look respectable.” We agree. Attempting to predict price movements in financial markets is a fool’s game. Supply and demand is what ultimately moves price so we employ sophisticated algorithms to determine who is in control – the buyers or sellers. We are not in the business of predicting markets. We never tell the markets what we think they should do. Rather, we monitor and objectively measure current market conditions and react accordingly. Aligning ourselves with these forces puts the odds on our side.

  • Momentum Persists

    Momentum is the idea that a body in motion tends to stay in motion. This physical law is also prevalent in financial markets. Eugene Fama, a Nobel Prize winner for Economics, has said that momentum is “an anomaly that is above suspicion…the premiere anomaly.” We see that markets or sectors that have had strong performance tend to see continued outperformance for a period of time. Our portfolio selection process takes advantage of this tendency.

  • Risk and Reward

    Traditional investment management says that an investor’s asset allocation determines their risk and return profile. More risk is required in order to get the potential for larger returns. The problem is that these returns come with the price of increased volatility and risk that most investors cannot tolerate. Ultimately, investors are forced to choose between potential increased returns and safety. Our active management approach aims to get the best of both worlds – competitive returns with reduced volatility though the use of a proven strategy governed by objective rules.

  • Multiple Strategies

    Most people are familiar with the idea that combining asset classes will reduce portfolio risk. Another important concept is the use of multiple strategies. The blending of multiple non-correlated strategies into a portfolio has the benefit of providing the majority of the returns of the base strategies while the reducing overall volatility. Each MVP Portfolio is a combination of several unique strategies that use different signals and investment choices in order to take advantage of this idea.

  • Win by Not Losing

    Benjamin Graham is known as “The Dean of Wall Street.” He famously said, “The essence of investment management is the management of risk, not the management of returns.” The key to good returns over multiple market cycles is limiting losses in down markets. It’s not how much you make in up markets, it’s how much you don’t lose in down markets. The MVP Portfolios are built with risk management at their core.

These core concepts are the foundation for our investment process. We provide risk-managed investment strategies that dynamically respond to changing market conditions. Objectively observing the supply and demand, trend and momentum of markets allows us to participate in bull markets and protect in bear markets.

Process

One of the primary enemies of an investor is emotion. Behavioral Finance has shown that we are ill suited to make financial decisions in the midst of making or losing money. To overcome these inherent negative biases we use a rule-based approach to portfolio management based on our beliefs and core concepts. We begin with an investment universe that gives us access to multiple asset classes and many market subsets. We then use our proprietary Safety Signals to determine when it is safe to be invested and when it is prudent to step aside and play defense. In healthy market environments we select our portfolio components from our investment universe using a momentum ranking system. We then make changes as the signals warrant or during periodic rebalancing.

Partners

Accelerated Wealth Advisors Financial StrategiesWe partner with Schwab Institutional as our custodian. They are a leader in the industry, serving Registered Investment Advisors and their clients.

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Partnership Strategies

Alternative Investment Strategies are Private Placements designed to make strategic investments in several economy sectors. These real economy investments include real estate, private equity, and private credit strategies. In addition strategies include an investment fund designed to make investments in small to mid-size healthcare providers with an anticipated focus on investments in acute care hospitals, specialty hospitals, ambulatory surgery centers, and other independent healthcare provider operating entities.

ASI Capital, Accelerated Wealth, Colorado Springs
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