At Managed Financial Services we have always been big believers in the benefits of utilizing different investment strategies within a client’s portfolio in order to minimize risks, and maximize returns with the purpose of helping our clients achieve their financial goals. To attain these goals we may utilize a combination of strategies based on a client’s objectives and risk tolerance. In general, these strategies are either more tactical in nature or based on traditional buy and hold asset allocations.
Tactical Asset Management – Tactical strategies seek to actively allocate assets based on a mathematical ranking process to help identify market sectors with the greatest upside potential. This is a powerful risk management tool because it seeks the most productive sectors of the market helping minimize the effects of market corrections by either moving to cash or more defensive asset classes.
Managed Financial Services may employ several different tactical strategies including algorithm based portfolios, known as Price Trend Portfolios or PTP. The PTP portfolios will ideally have 11 different models each representing a different position within the portfolio. Each model has a unique calibration to optimize the analysis periods of the funds representing different asset classes that it can select. Each model has its own optimized sell discipline.
Other tactical strategies seek to identify short-term periods during a year that have historically had a high probability for market appreciation. These portfolios will only be invested in the market for short periods totaling approximately 75 days and otherwise remain in a money market fund or similar cash equivalent investment. The actual mutual funds representing different asset classes will be determined based on the best performing asset class at the time the position is established.
A third tactical strategy seeks to identify sectors of strength in the market. At the beginning of each quarter, an analysis of the markets on a quarterly risk measurement determines whether to invest in either Equities or Bonds/cash during the quarter. Based on the outcome of this risk measurement, the model will select the highest ranking sectors in the market. When invested in equities a reallocation is made on a monthly basis. On the other hand, when the model is invested in the fixed income/cash sector a reallocation is only made quarterly.
Strategic Asset Management: Strategic asset allocations are based on modern portfolio theory. This is more of what is commonly referred to a buy and hold strategy. Often these allocations are re-balanced on a quarterly basis. These portfolios are designed based on a client’s risk tolerance. A client’s risk tolerance will not only determine the allocations to fixed income and equities but also the types of equities/fixed income funds used to construct a portfolio.