DrewS

Dull Is Good - J.P. Morgan

Tortoise v. The hare...
Being able to stay invested through the dullest and wildest of environments equals win:win.
definedriskstrategy.com

6 Strategies to Use in Rebuilding Your ETF Portfolio

Most importantly, stay invested. If your plan doesn't account for catastrophic losses, you are probably going to sustain one. What is a catastrophic loss? 15, 20, 25%? For me it is a low percentage single digit percentage. Undoubtedly it is different from person to person. Regardless, if you have to sell low because your emotions are too strong to resist, then your plan is missint something. You need some downside protection. I started using options in 1997 and they, with some dividends, have produced all my gains (more than 240%) since 1997. I never sold at the low unless I wanted to generate a loss and I have participated in nearly all market gains.
Learn more: swanconsultinginc.com

Consuelo Mack: Does Asset Allocation Still Work?

Does Asset Allocation Still Work? Of course. 2008 merely exposed the shortcomings. Like all legacy investment models, asset allocation needs additional components to minimize losses during downward market moves of any degree. This is not new or earth shaking information, but is now on the minds of all long-term investors who want protection & growth. So what do you do? Define your risk. Risk comes in many variations, but risk is there and it demands the bulk of your attention and understanding. Once it is defined, it can be measured, controlled and managed. Defined Risk Strategies pre-determine risk and eliminate most of the downside risk, which opens the door to generate returns.

Will Strategy Diversification Replace the Asset Allocation Model?

Investors need to define risk. Traditional theories rely on historical values to speculate on future risk. Regardless of tolerances, too many assumptions are made even in the most conservative allocations. 21st century strategies must define risk to succeed. HOW? Defined Risk Strategies. They eliminate most of the downside risk and don't depend on market direction (up or down) to succeed. learn more: swanconsultinginc.com

Asset Allocation Models Are Broken

I don't think the models are broken. I think they are incomplete. Regardless of the complexity of the allocation, it still relies on historical values and relationships to quantify risk. 2008 was the 2nd time since 1999 that this approach failed when it was most needed (2000-2002 also comes to mind).
The risk of owning stock can be defined and limited. A Defined Risk Strategy does exactly that. It eliminates the bulk of risk associated with the speculative features like timing and stock selection. By getting rid of the risk an investor is not willing to accept, and managing the risk that is acceptable, allows investors to stay invested in stock. Thus, the best growth potential remains active in the portfolio.
swanconsultinginc.com

Surviving Financial Hurricanes 2.0

To stay in the market, you need to be able to take punch. In the last 10 years, most common approaches have shown a glass jaw. However, a Defined Risk Strategy that maintains a disciplined stance at all times has shown it can take a punch. A Defined Risk Strategy can protect capital investments and deliver substantial returns.

The profits generated from a Defined Risk Strategy prove the value and necessity of downside protection. Conversely, the risk associated by not owning any downside protection, is an excessive and unnecessary gamble that tests the portfolio tolerances well beyond what most investors can withstand.

The Defined Risk Strategy takes the bulk of traditional risk factors out of the investment. Traditional risks associated with stock selection, market timing, and market direction, are no longer part of the equation. In other words, the Defined Risk Strategy accepts and manages the risk an investor is willing to accept and gets rid of what they don't.

swanconsultinginc.com

Thoughts on Diversification and Risk Preference

Diversification is helpful, but it isn't the final solution to managing risk. 2008 showed that well diversified portfolios couldn't take the heat. The risk was dependent on historical values and relationships that needed continue to react the same way, especially in years like 2008. Even if 2008 is a once in a hundred year occurance, the fact remains, it can and will happen from time to time. Successful risk management loses some shine in raging bull markets and tends to get overlooked, but now is the time to go back to basics and heed the advice of under-appreciated ideas like. 'A penny saved is a penny earned.' If a strategy could potect my pennies in a year like 2008, like you, I would want to know about. Well, there is, and it did. A defined risk strategy that we've followed since 1997 has allowed us to take some serious punches from the market (2000-2002 and 2008).

Asset Allocation: The Key to Proper Diversification

"It is important to note that the great claim of asset allocation relates to the risk reduction achieved by diversifying over several broad asset classes (i.e. stocks, bonds, cash and real estate) without a similar reduction in return. However, the risk reduction is strictly theoretical (typically based upon relationships that existed over a particular period with no guarantee that these same relationships will continue in the future). This is the crux of where asset allocation or modern portfolio theory breaks down. Risk is not defined; instead it is merely expressed in historical standards." - Randy Swan 1997 Swan Consulting, Inc

Beware of Market Performance Myths

I concur. Your positions apply to many topics...

"It is important to note that the great claim of asset allocation relates to the risk reduction achieved by diversifying over several broad asset classes (i.e. stocks, bonds, cash and real estate) without a similar reduction in return. However, the risk reduction is strictly theoretical (typically based upon relationships that existed over a particular period with no guarantee that these same relationships will continue in the future). This is the crux of where asset allocation or modern portfolio theory breaks down. Risk is not defined; instead it is merely expressed in historical standards. " - Randy Swan, 1997

Five Criteria for Timing the Market Bottom

I believe the bear market will be over when the following occurs:
= the dividend yield on blue chip companies is over 7.5%
= P/E ratio of less than 10
= current debt level of individuals, businesses and governments is decreased dramatically.

most investors will have given up on stocks and most investments in general. It took several decades to get to this point and it does not seem realistic that it would be over after one year. The main reason being investor confidence has been shattered and it seems apparent that it will take a lot longer than one year to rebuild that confidence.

Don't Expect Immediate Gratification from Markets

Diversification misses the mark:
www.pr.com/press-relea...

Asset Classes and ETFs in January: And They All Fall Down!

Asset allocation misses the mark.
www.24-7pressrelease.c...

False Signals, But Real Hope

It is unlikely we are entering a bull market. At least not one that resembles anything like what investors got used over the last 30 years.

Will we Enter a lost decade like the japanese?

Dividend-Based Strategy - Never a Bad Time for Defense

The best offense is a good defense. Better yet, a great defense. Unfortunately, most investors don't see the value of defense when the primary reference points over the last 30 years is primarily bullish. It all changes after a knock down, or a decade of flat returns. Fortunately, the old fashioned buy & hold (and pray) or diversification theories are not the only tools in the shed now. A properly hedged portfolio can significantly reduce risk and still allow an investment to participate in market growth. Individual investors can employ risk-reduction techniques to overcome the pitfalls of the traditional investment strategies.

Will We Enter a 'Lost Decade' Like the Japanese?

Since the last decade can be considered -the decade of no returns- it would be wise to consider the possibility of 10 years like the Japanese 1990s. Few, if any, point to any signals that indicate the bottom is here, or near. Regardless of specific predictions, I think it would be tough to argue we are about to enter a powerful bull market like we saw in the 80s & 90s. Regardless, I think it is prudent to acknowledge the traditional strategies -buy & hold or diversification- are not sound. The do not offer enough downside protection when it is needed most. When it comes to stocks, I think Randy Swan summed it up best, "...stock with a reasonable amount of protection and income generating opportunities are you only real bet..."