Our Investment Strategy
We have our own Investment Committee to perform in-depth research of the overall health of the market and on specific investments. Each week, we examine multiple indicators including, but not limited to: new highs and lows, market breadth, greed/fear indicators, price-earnings ratios, interest rates, relative strength, Bollinger Bands, and bond prices.
Once our review reveals the big picture, we drill into the specific investments within each client portfolio. To be sure they are performing as expected, we examine each holding in every model against certain standards. Investments performing up to standard or above are left alone. If we find an investment is underperforming – particularly during a market downswing – we seek a replacement that is more appropriate.
We do not necessarily make changes every time we perform an analysis – if the current holdings in our models are performing as expected, they are left unchanged until the next analysis.
Using technical and fundamental analysis, we attempt to identify the current investment cycle and evaluate market risk. This process drives McDaniel Knutson's overall asset allocation decisions. We then utilize a risk-adjusted trend analysis approach to attempt to identify and invest in the strongest sectors, asset classes, and specific investment funds.
During periods of generally rising markets, known as Secular Bull Markets, one can generally buy and hold with a high expectation of making money. The opposite holds true during Secular Bear Markets. In the past 121 years, there have been five bull markets and four bear markets. A close examination of the chart below shows that the stock market experiences huge swings during 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. You can see there are several instances in the past century in which the U.S. market has made no net gains for as long as 25 years.
Logarithmic graph of the Dow Jones Industrial Average from 1897 through 12/2017. Source: Graph created by Guggenheim Investments using data from www.dowjones.com. The Dow Jones Industrial Average is unmanaged and unavailable for direct investment. Returns do not reflect any dividends, management fees, transaction costs or expenses. (source: Guggenheim Investments 12/2017)
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.