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Our Investment Strategy

Each Monday morning, our Investment Committee performs in-depth research of the overall health of the market and on specific investments. This team examines multiple indicators including, but not limited to:

  • new highs and lows
  • market breadth
  • greed/fear indicators
  • price-earnings ratios
  • interest rates
  • relative strength
  • Bollinger Bandwidth
  • bond prices

Once their review reveals the big picture, they drill into the exact investments within each client portfolio. During this weekly analysis, the Investment Committee examines each holding in every model against certain standards to make sure it is performing as expected. If a particular investment is performing up to standard or above, it is left alone. If it is underperforming – particularly during a market downswing – the Investment Committee will seek a replacement that is more appropriate.

The Investment Committee does not necessarily make changes every time an analysis is performed – if the current holdings in our models are performing as expected, then they will be left as they are and analyzed again the following week.

Active Management

During periods of generally rising markets, also known as Secular Bull Markets, one can buy and hold with a high expectation of making money. The opposite holds true during Secular Bear Markets.

History shows that stocks generally trend upwards though they can experience extended periods in which there are no lasting gains. As shown in the chart below, there have been several instances in the past century in which the U.S. market has made no net gains for as long as 25 years.

A close examination of the chart shows that the stock market experiences huge swings during Secular Bear Markets. These periods require a more active investment approach. If we can capture gains made during those upswings and step aside during downswings, then we can still make profits.

The Investment Committee uses both technical and fundamental analysis to attempt to identify the current investment cycle and evaluate market risk. This process drives our overall asset allocation decisions. They then utilize a risk-adjusted trend analysis approach to attempt to identify and invest in the strongest sectors, asset classes, and specific investment funds.

Logarithmic graph of the Dow Jones Industrial Average from 12/1896 through 12/2010.

Source: Graph created by Rydex|SGI using data from 01/2011.

Performance displayed represents past performance, which is no guarantee of future results. The Dow Jones Industrial Average is unmanaged and unavailable for direct investment. Returns do not reflect any dividends, management fees, transaction costs or expenses. Contact your financial advisor to discuss this concept further. For more information call 800.820.0888 or your financial advisor. (source: Rydex 01/2011)

Past performance is not an indication or guarantee of future results. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. A diversified portfolio does not assure a profit or protect against loss in a declining market.