Index Timing and Active Trading

During the 1990's passive asset allocation investment strategies gained popularity due in large part to a record Bull market. Modern Portfolio Theory and Static Asset Allocation models provided a method of investing that was easy for clients to understand and simple for advisors to implement. It was a well accepted premise that a diversified portfolio would be higher in the long run. Unfortunately with the end of the 1990's came a return to normal volatility in financial markets. Advisors relying solely on the market's direction to provide returns have been disappointed.

We have learned that passive investing works fine when markets are trending higher, but leaves advisors with few solutions during periods of decline. Simply buying and holding a diversified selection of mutual funds isn't enough for clients today.

Passive investing forces the investor to accept the market return, minus commissions and fees. Passive investing offers no ability to improve upon the markets results during positive periods, and little protection from losses during market declines.

Unlike passive asset allocation methodologies, an active investment approach uses various techniques to take advantage of opportunities that exist in up and down markets. Active management does not require a bull market to make money. Advisors who utilize active management strategies offer their clients more control over risk, volatility and returns.

The best part is, you don't have to be a day trader to benefit from an active methodology.

Tools to compliment Asset Allocation Portfolios

When it comes to the equities market, not all environments are equal. There are periods for stocks that are more profitable than others. Giving clients exposure to equities when markets are advancing, while reducing exposure during periods of decline is the essence of tactical index based trading.

While actively trading individual stocks has its advantages, equity indexes like the S&P 500, the NASDAQ 100 and the Russell 2000 offer broad diversification with much less volatility than individual issues. Indexes also tend to trend much longer that a individual stocks. Because of these attributes, our index based trading models have several applications for investment advisors.

Directional Trading for Profits
Armed with clear instructions to buy, sell or short a particular index, our subscribers have the means to profit in both advancing, and declining markets.

Market Barometer
Advisors also can use our model signals as a guide to the health of the market. These signals can provide a level of confidence when putting new client money to work in during a buy signal, or remaining defensive during a sell or short condition.

Hedging Market Risk
For advisors who offer asset allocation programs to their clients, our index models provide a means to hedge the risk of their buy and hold investments.

*inversely correlated mutual funds would be utilized.

Aligning investment holdings in the direction of the general market trend can produce huge rewards.

Models for Market Timing

Equities:
Long/Short NASDAQ 100
Long/Short Small Cap
Long/Short S&P 500

Fixed Income
Long/Short High Yield Bond