Tactical Allocation Portfolios
Building Stronger Portfolios through Power Investing
Our goal has always been building stronger portfolios for our clients through the top down data driven technical process we developed over many years. The Power Investing process is designed to allow us to cut through the noise in the markets and concentrate on what is really happening under the hood. By focusing on real data about every segment in the market and measures participation, price performance, relative strength, relative performance and relative momentum on every level down to individual securities.
Looking at strength and weakness from every useful angle we can find, compiling that into a weight of the evidence market view to drive the diversification, risk profile and structure of the core portion of the portfolio. The same deep dive process also identifies a constant supply of sector opportunities for the exploring portion to drive the market outperformance we are looking for.
We believe no matter what your risk tolerance is, whatever portion you decide to put to risk in the markets should be allocated to the strongest segments relative to the broader markets and overall risk associated. Why would we want our clients invested anywhere else?
All the Opportunities of the Best Themes in the Market without having to settle for the Individual Company risks that usually come along with them.
ETF Focused for These Specific Opportunities without Company Specific Risk
When we first started building the Power Investing process back in 2004 or so, it all started because we wanted to be able to take advantage of sector themes we were seeing in the markets, but couldn’t really find a good way to compare them as well as other investment choices that were available for our clients. We wanted to maintain a diversified portfolios, but felt there was definite value in incorporating the core and explore portfolio strategy to take advantage of themes we were finding in our research.
Back then, Mutual Funds were still the best way to take advantage of these, but that market was limiting in both choices and specificity that our relative strength research was uncovering. There just weren’t enough sector plays that were allocated properly to exploit the opportunities, but we also didn’t see the value in taking the many types of excess risk and costs that investing in the individual stocks brought with it, so we stuck with the sector rotation idea and it worked quite well.
Little did we know when we were building the system what was coming in the ETF world and the incredible synergies it brought to Power Investing. Today there are thousands of ETFs to choose from in almost every flavor all the way down to the industry and focused theme levels. We couldn’t be any happier to be helping clients as the perfect storm of opportunity comes together.
The simplest path to improve portfolio performance versus the markets is to make sure you are invested in things that are outperforming the markets.
Strong Core Structure
Starting with a core structure for the majority of our portfolios diversified allocations. These allocation differ based on the risk profile chosen and give the stable base structure for each to build off of. Even the allocation of diversified portion of the portfolio is driven by an overlay of relative strength to allow us to overweight those broad asset classes and segments that are showing the most strength while underweighting or outright avoiding those showing emerging or outright weakness. This in itself gives us an edge over the normal asset allocation you see with most portfolios and financial advisory firms. Then on a regular basis these allocationns are rebalanced based on the markets actual actions, not narratives.
The exploration part of the portfolio is where we work to provide the portfolios next performance edge. We constantly scan the markets from the top all the way down the to the theme level to find where money is flowing and good buying opportunities may be forming. In today’s world of ever growing choices of ETF and other pooled products it takes a solid filter to figure out where to focus, but with the right tools gives us ever expanding opportunities to exploit the markets moves. We are not out to constantly trade in and out of every sector, instead identifying the strongest trends and riding them as long as they show the leadership we are looking for.
Dialing in Risk Management
Of course, focusing on relative strength and market participation alone provide a deep level of understanding of where the markets and each portfolio holding are, in itself helping us mitigate risk some level of risk. Overall risk level of the tactical portfolios are adjusted by the individual allocations to each holding to begin with. This allows us to still utilize our best ideas in all three of the strategy risk levels by adjusting different position sizes to make sure the overall portfolio risk dials in right where we want it. Conservative, Moderate and Growth portfolio provide choices for your equity based portfolios. Our clients can also combine them based on time and goal specific accounts to dial in their risk to an even more precise level.
It all comes together to give the balance of a diversified portfolio with a strong relative strength component to drive long term performance and risk management.
Once you are focused on relative strength, dialing the risk to suit specific portfolio objectives becomes a whole lot easier.