Investments | CPA Financial Planning, LLC

Investments

You deserve a better investment methodology than the standard, risky advice you get from the typical Wall Street stockbroker or financial advisor. While you want to grow your money, you must protect it from major market losses.

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Investment advisory services

Our Approach to Investing is Different (and that’s good)

You deserve a better investment methodology than the standard, risky advice you get from the typical Wall Street stockbroker or financial advisor. While you want to grow your money, you must protect it from major market losses. Most financial advisors have an “always invested” investment philosophy, meaning you stay invested during major market down trends, and potentially suffer big losses. We believe you must protect your capital and move to the sidelines during those times. Your portfolio must be carefully managed for risk and volatility, and have protection of capital as a primary objective.

Most investment advisors utilize either one of two basic methods for managing investments: Buy & Hold, or Market Timing. However, we believe both of these methods have serious flaws, but we have found a third method that we believe is better.

“Buy & Hold”, or as we like to more accurately call it, “Always Fully Invested”, means buying a portfolio of stocks, bonds and mutual funds, and then always keeping that portfolio 100% (or close to 100%) invested at all times, regardless of what is happening in the financial markets. So with this philosophy, even when the market is going down 56% like it did in the 2007-2009 market collapse, the “buy & holders” faithfully stayed the course and watched the value of their equity holdings drop by half. We believe this approach with our clients’ money is reckless and unacceptable.

So what about the other method, “market timing”? Well, truthfully it’s not much better. The premise of market timing is to predict the ups and downs of the market (or a particular market segment or even a particular stock) so that you own the market or stock when it’s going up, and sell it before it goes down. Sounds all good in theory, but does it really work? After numerous academic studies, most experts conclude that market timing doesn’t work, and we agree.

The problem with market timing, as we see it, is in the word “prediction”. We don’t believe that anyone has a crystal ball, or any other way of accurately predicting the future. But we do agree with the primary objective – that it’s a good idea to only own a market or a stock when it’s moving up in price, and that it’s also a good idea to not own a market or a stock when it’s declining in price. So how can we accomplish that noble objective, but not be a “market timer”?

We have found a third method that we believe combines the best attributes of “buy & hold” and “market timing”, while also eliminating the downsides of both of those strategies. This method is called “Market Trending”.

market trending for investment management

“Market Trending” is a different type of approach that shares some of the positive characteristics of both the “buy & hold” and “market timing” philosophies. Historically, it is easy to look at charts of the stock market and point to upward trends and downward trends. It goes without saying that if you could be invested in the market during the upward trends and be repositioned in a more secure investment during the downward trends, you may experience greater long term success.

The challenge is in identifying what may likely happen in the months and years to come. The goal of market trending is to verify trends and act upon them. However, unlike market timing, market trending is not a reaction to the market, nor is it a daily buy/sell routine in efforts of predicting whether the market will go up or down next. Instead, market trending seeks to identify longer term trends to potentially increase your odds for long term success. We utilize multiple managers who identify times to be invested and times not to be invested using their own proprietary formulas to calculate the underlying “cyclical” (long-term) trend in the markets. When invested, they are invested in a diversified portfolio of stocks, bonds, mutual funds, or ETF’s, depending on the particular manager’s area of investment responsibility. When not invested, money is placed into cash or cash-equivalents, such as money market funds.

Is Your Investment Portfolio Protected From Severe Losses When the Next Big Market Downtrend Happens? How to Know For Sure.

Whenever the next big market downtrend occurs, will your investment savings be protected from potential catastrophic losses? If you’re invested in the typical “buy and hold” portfolio of mutual funds and stocks, the likely answer is “NO”! Mutual funds are legally restricted to maintaining a minimum invested percentage level of the money they manage as defined in their charter, typically in the 70-85% range. What that means is that even if the managers of the mutual fund know the market is crashing, they must keep their fund invested at least at that minimum level. So if it’s 80% for example, then even when the market is crashing around them (like it did in 2008), they must keep at least 80% of their funds invested in the markets. It’s no wonder so many people lost so much money in the financial crisis of 2007-2009.

Get Your Free Portfolio Review

We will review your current investment portfolio for risk, returns, and fees, plus also perform a “Stress-Test” review of how your portfolio might perform during the next market down trend. Call us at 404-829-4944 or email to info@cpafinancialplanning.com.

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