FAQ 2
HOW IS THE TRENDCALC INVESTMENT PHILOSOPHY DIFFERENT?
It seems that most investors are destined to suboptimal results and average returns (and likely not even average). Much of this is driven by who an investor chooses to work with (and not work with) and what they choose to believe (and not believe).
The conventional wisdom that dominates today’s financial advice industry is a largely passive buy-and-hold diversified asset-allocation where a little bit of everything is owned as a means of managing risk. The expectations are limited to achieving and being average. A passive buy-and-hold strategy is built on the assumption that investors are always rational and investment markets are always efficient. This is not borne out by market data. Investors and investment markets are not always rational and are not always efficient all of the time.
Passive investing has great benefits, but it is just one of many ways to successfully invest. A passive strategy can be a great choice, but its success (or failure) will be subject to a favorable economic environment and favorable market conditions. Passive works well, but not always, and not throughout full market cycles.
Economies and markets are dynamic. They are cyclical in nature and ever-changing. As such, it is TrendCalc’s position that there is not a one strategy approach that will provide great results and superior risk controls for all investors in all economic environments and market conditions.
TrendCalc Dynamics’ investment philosophy is not just reliant on favorable economic environments or the success or failure of any particular capital market, sector or asset class to thrive and succeed.
Only through the fullness of time that includes various economic environments, capital market conditions and multiple bull and bear cycles can it be demonstrated which of the multitude of investment strategies are great and should be considered in managing investment portfolios and retirement plans. Even with longer-term time horizons, ongoing scrutiny must include short- and intermediate-term analysis because we don’t “live” in the long-term. We live and make decisions in the intermediate and shorter term, especially the “here-and-now”.
There is no such thing as one great investment strategy that will be great forever. All strategies have cycles of performance in which they tend to be over- or under-performers. Some work better than others. Some tend to be consistent underperformers (losers) and should be avoided. Some are significant out-performers in long-term stable, upward markets periods. Others tend to do great during periods of choppiness and even declining markets. A key to outstanding long-term performance is to determine the various strategies that tend to have probabilities of success in the intermediate- and long-term, then them in combination with each other.
The up and down ebb and flow of the markets and its continual gyrations tend to scare investors. Often, this leads to less than ideal decision-making. We have found that having multiple strategies within the same investment portfolio tends to lessen (not eliminate) these gyrations. By emphasizing multi-dimensional portfolios with strategy diversification considerations, in addition to asset diversification, we feel that it makes for a more comfortable and confident investor experience, even during shorter-term periods of under-performance. This may be one of the great benefits of working with TrendCalc as clients aren’t inclined to be overly worried or stressed about the markets or their financial futures.
TrendCalc has a series of three basic investment strategies and model portfolios: (1) TrendCalc Strategic Series, (2) TrendCalc Active-Dynamics Series and (3) TrendCalc Hybrid-Dynamics Series. They combine different independent strategies, both active and passive, into a variety of multidimensional portfolios while employing an active risk management process to minimize the portfolio drag of underperforming assets to minimize downside losses, especially in times of systemic markets stress.
Our Active-Dynamics’ and Hybrid-Dynamics’ strategies emphasize capital preservation combined with capital growth through a series of multi-strategy approaches. Their primary directive is to control risk by minimizing exposure to losses and drags on performance. The objective of the Dynamics philosophy process is to capture growth of those capital markets deemed as having the greatest probability of rising, while eliminating, or minimizing, exposure to those markets we deem as having a high probability for underperformance and losses.
TrendCalc makes a strong case for a multidimensional, multiple-strategy combination within a single investment portfolio. We recognize the importance of asset diversification, but only to the extent that it benefits portfolios without over-delusion of returns. More importantly, we recognize that it is just as important (and likely to be more efficient) to minimize risk through strategy diversification.