There are numerous investment strategies from which to choose; however, equally weighted asset allocation is our choice. It is based on our experience of over fifty years in the investment field, ranging from physical exchange trading, fund management applying Modern Portfolio Theory, and risk management using derivatives. As a result, we have developed three types of global diversified portfolios, aiming to maximize return based on the level of chosen volatility. The three portfolios are broad index based, rebalanced between once, or twice per year, hence transaction costs are kept at the minimum. We assume that investors use index tracker funds, or Exchange Traded Funds (ETF) to construct such portfolios.
Academic, and industry research shows that a simple, equally weighted portfolio outperforms and reduces the tracking error against its benchmark in the long-term. Relative volatility capture is one of the major factors behind the outperformance, in rebalancing while maintaining equal weights by selling when prices are high, and buying when prices are low. As result, the investor will have a better investment outcome year after year by applying this cost averaging process.
The Financial Times recently reported* that a survey of Certified Financial Advisors (CFA) shows that investors’ confidence in their financial advisor is currently a mere 49%, the lowest in two years, and 47% of investors change advisors due to underperformance, and 41% because of high fees. Further, advisors promoting active fund management, market timing, and “star” fund managers have contributed to the drop in investor confidence*. With many individual investors lacking the experience of investing, or not getting efficient advice, they sometime get involved in timing the market, which is an exercise of futility, often buying rising shares and then selling off lagging ones. A plethora of academic, and professional research shows that the stock market fluctuates randomly, and asset allocation contributes to over 95% of the returns of the portfolio, and not stock picking. Further, some investors try to time the market instead of considering their investment as a long-term strategy; such approach will incur transaction costs, and could reduce the overall return of the portfolio. Our objective is to provide individual investors with the basic principles for long-term investment success through a simple, cost effective, fully automated unbiased index fund approach.
There is a risk in investing, as the prices of securities fluctuate and the returns may be such that the value of an investment may fall below its initial value. You should speak with an authorized investment advisor if you are not sure about the suitability of this type of investment style. We give neither financial, nor tax advice. Therefore, seek independent advice if you are uncertain.