The chart above shows 12 years trading history of the S&P 500.
I often find it rather refreshing to remind myself about why I manage money the way I do. So much of our industry (mutual funds, pension plans, etc.) is built on convincing investors to "stay the course", or "buy and hold". This is because the entire industry is set up to grow assets under management (AUM), if AUM grows then fees grow. AUM won't grow if we have investors trade out of our funds and into cash!
On December 31, 1998, the S&P 500 closed at 1229.23. Today, nearly 12 years later it is at 1243, basically unchanged. But over the course of those 12 years we've had a few opportunities to make money, and a few opportunities to protect the money we've made. We started with a 68% rally to the 2000 top, then a 50% sell off to the March '03 lows, then a 104% rally to the October '07 top, then a 58% drop to March '09, and lastly an 83% move up to our current highs. Yeah, stocks haven't done anything over the last 12 years, if you are a buy & hold investor!
Fortunately, our style of managing money is to be in harmony with the markets; participate on the upside, and get out of the way on the downside. While we can't forecast the future, we can at least determine the type of market (bull or bear) we're in today.
The beauty of Global Tactical Asset Allocation (GTAA) is that these dramatic bull and bear markets occur in all assets, (stocks, bonds, commodities, and currencies) on a global basis. A disciplined allocation process helps you find those assets that are rising, and avoid those that are falling. And in my world, if nothing is working, cash is just fine.
The most important AUM to me is my own Assets Under Management. My job is to protect and grow them, while generating the highest risk-adjusted return possible. My clients all have the same objective and portfolio as me, our goals are the same, as are our expenses. No conflicts of interest, no ulterior motives. If you would like to talk about my process in more depth, give me a call.
Be careful out there, and keep the lights on,
Chris Wiles, CFA
412-260-7917
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This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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