No one knows what the market is going to do over the next week, month or year, except for this: it’s going to fluctuate.
This is the only rule that holds true in investing. It’s impossible to consistently call price moves, but it is certain that prices will move. Bull markets begin and end, recessions lead to recoveries, today’s market leaders will be replaced by tomorrow’s scrappy upstart. It can’t be avoided, but it can be taken advantage of.
While the market often seems irrational, it does follow informal rules and general tendencies, which is why Gary Goldberg Financial Services is excited to unveil a new investment strategy centered on the concept of “tactical trend following,” a stable way to navigate the market’s long-term movements while staying nimble enough to adjust for any change in circumstance.
The program is a collection of exchange-traded funds, with 35 percent of the holdings “core” funds – tracking broad markets like the S&P 500 and Russell 2000 – and the rest “satellite” funds – which offer exposure to defined U.S. sectors, industries and developed countries abroad, all of which can offer moves of greater magnitude.
All of these funds track indexes, and when one of those indexes begins a positive part of its cycle, we add it to the portfolio. When the trend turns negative, we exit the fund but continue to monitor it until a bottom has been detected. As there is always some part of the global market that is expanding, the strategy works even when major parts of the market are struggling. If no positive trends are identified, the “satellite” portion can be reallocated to cash – providing your portfolio with up to 65 percent of downside protection.
Trend-following programs are not designed to time or outperform the market – both of which are nearly impossible to do consistently – but to capture the bulk of an upward move. This means ignoring the day-to-day noise of a fund’s performance in favor of its place within a cycle. Historically, more than half of market trends last for six months, according to Trendrating, and 40 percent of trends record gains greater than 50 percent.
In addition to its unique approach to risk management, the Trend Trac ETF solution will have a low correlation to other GGFS strategies, meaning it will complement them in diversity. If you feel this approach may benefit you or you would like to learn more about it, please don’t hesitate to contact me at 845-368-2907.
Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at 845-368-2907 or Chris.Hanly@garygoldberg.com