Buy and Hold” Does Not Work!

There, I said it. Now that I’ve just shattered the very foundation of your long-term investment strategy, you’ve got two choices. You can dismiss me as a “maverick” and continue along, or you can contemplate that statement and listen further with an open mind.

If you find yourself in the latter camp, allow me to continue. I know people like Warren Buffet have been telling you that the market averages about 10%, and if you stay in it for the “long-run”, you will be rewarded. The devil is in the details. Just exactly how long is the “long-run” anyway? The definition of “long-run” according to Ibbotson and Associates, the company Wall Street turns to for historical data on the S&P 500, is about 80 years. Whenever you see the charts that reflect the 10% average return on the S&P 500, usually the beginning date for the chart is either 1925 or 1926. Not exactly consistent with the time horizon that a typical retiree might use to project income for the remainder of their life. In fact, at 70 years of age, your remaining life expectancy is 17 years per the life expectancy tables published by the IRS. Not quite the 80 years the charts use to illustrate the concept. If you don’t have 80 years, the S&P 500 doesn’t always average 10%. In fact, on more than one occasion it would have taken more than 10 years just for the S&P 500 to have broke even! Not to mention the countless number of people who are still trying to recover their losses from the 2000-2002 stock market crash.

We believe there is a better way! It’s called DYNAMIC PORTFOLIO MIGRATION.

There are three components to our approach.

1. First, we make quarterly tactical adjustments to the portfolio to take advantage of short-term cyclical movements. These changes do not affect the basic ratio of stocks to bonds, but they are designed to lock in gains or enhance returns.
   
   
2. The second component involves avoiding the riskiest time periods in the markets. Historical analysis of the S&P 500 indicates that certain time periods (such as the summer months) have carried a much higher level of risk, while others (the decennial cycle in the sixth year of every decade) have offered very little downside risk. By studying the cycles and applying certain techniques we can attempt to reduce volatility and protect returns.
   
   
3. Finally, we unfortunately have had to add “event-driven” changes in the post 9/11 era. We can and will move into cash immediately following catastrophic world events.

The time for “buy and hold” has come to an end; the time for DYNAMIC PORTFOLIO MIGRATION is upon us. It is important to keep in mind that depending on the method of investing that active trading required by Dynammic Portfolio Migration MAY result in increased costs and taxes thus lowering your return.

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