Risk-Controlled Approach
We believe that the key to successful investing is
to follow
a disciplined investment approach that
opportunistically seeks out superior returns during favorable market
conditions, but reduces market
exposure during downtrends in order to preserve capital.
Our philosophy differs from the typical
"diversify and hold" approach that we believe stifles investment performance without
adequately reducing risk.
Our risk controlled investment approach is described below:
1. Diversification by Asset
Class
First we will help you determine what type of
investments to own and what percentage to allocate to each. These
investment types are called asset classes and the process of
dividing the investment portfolio among these different asset classes is referred to as
asset allocation. The four asset classes
that we use include cash equivalents, bonds, real estate, and
stocks. This type of diversification can be very effective in
reducing risk since these asset classes tend not to be highly correlated.
However, it is important to note that there may be periods when stocks,
bonds, and real estate all decline in value at the same time.
2. Diversify among "Core"
Investments
Within an asset class, we may diversify
among multiple investment styles (i.e., sub classes) to further reduce
portfolio risk and provide for more consistent
returns.
The term "core holding" if often
used when referring to an investment that is intended to remain in the
portfolio throughout a full business cycle, often with a long term
perspective. We will add the
prefix "Core" to the name of
our investment styles that are invested in this manner. An example of an allocation of "core"
investment styles within our "Balanced" model portfolio is illustrated below.
"Core"
Investment Allocation

3. Diversify among "Trending
Following"
Investments
The "trending following" investment
styles in our
managed portfolios are designed to quickly take advantage of strong
intermediate term trends in the financial markets. Most important however, is our ability to preserve capital by
either switching to a money market fund or applying a hedge strategy to
protect against further declines during market down trends.
.
We monitor and compare the trends of over
two hundred foreign and domestic stock market indices on a daily basis. Because
we will alter the holdings in our trend following investment styles based upon
current market trends, we will add the prefix "Trend"
to the names of our investment styles that use a trend following
approach. An allocation of "trend following" investment
styles within our "Balanced" model portfolio is illustrated below..
"Trend Following"
Investment Allocation

4. Use Timely
Security Selection and Limit Losses
Because we are a small money management firm compared with
most
mutual funds and institutional money managers, we can be more nimble to adjust our
investment strategies to our advantage. We combine quantitative
(i.e., computer aided statistical) and
technical analysis in order to make timely buy or sell decisions. We
regularly prune out lower ranked and non performing securities in favor of
more timely selections. We quickly sell securities when bad news is
released concerning them. By following this active approach, we can
focus on our best choices and avoid holding too many securities which
tends to limit performance.
5. Keep Investment Management Costs Low
For the majority of the investments we manage, we perform
the money management in-house, rather than using mutual funds or third
party money managers. Therefore, we avoid a layer of fees when
compared to other financial advisory firms that outsource money management
using mutual funds or third party managers. We can often provide our
risk-controlled portfolio management service
at a cost competitive with do-it-yourself investors that manage a
portfolio of no-load mutual funds.