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Understanding our Rules Based Strategy

What a year we have had so far! *In the last 6 months, the US Markets (S&P 500) have gone through TWO 12%+ losses and recoveries! 2016 has had both one of the worst starts to a year AND one of the best recoveries ever, all within just the first 2 ½ months!* You’ve heard us talk about volatility a lot lately, and the first quarter of 2016 has been the definition of volatility! That has left a lot of our clients asking some questions like “how does Sound Financial make decisions in a market like this?” and “how does your Rules Based Strategy help?”. We’d like to try and answer a few of those questions today.

It all starts with our goals for each client at Sound Financial. They are:
 1. Protect Your Capital
 2. Grow Your Investments

First, we want to protect your capital because your investments only have the ability to grow if there is capital there to grow from! We strive to protect it by trying to control the amount of volatility in your investments. Adjustments are made to your investment mix that are designed to help prevent the downside losses from compounding during a difficult time in the market. If your losses continue to compound, if the market begins to move into a period of growth, your investments will take that much longer to see positive gains. To put it simply, you have to work much longer just to get back to even before you can see growth from where you originally started.

Our second goal for each client is to then grow your investments. We aim to do this by adjusting your investment mix into more growth markets as our signals indicate market growth. This will allow you as an investor the opportunity to maximize the time your investments are in a growth period, thus maximizing the potential growth for your investments.

To help accomplish these goals, we use a Rules Based Strategy to determine when to “protect” and when to “grow”. The Rules Based Strategy uses recent market performance data to determine when investment adjustments need to be made. This is important because it takes the emotion out of the equation. When you don’t have to factor in politics, world events, your “gut feeling”, or whatever you hear on the evening news into your investment decisions, you can make smarter decisions. The Rules Based process compares certain asset classes in our models against each other to determine overall market direction. The data tell us when to move to a more conservative mix to help protect your capital, or when to buy back into more of a growth mix.

What has the Rules Based Strategy meant for our clients in early 2016? Due to the volatility and market swings mentioned above, our clients have seen much more trading in their investment mix than they would normally see in a few months. This is designed to keep you positioned to help preserve your capital and prepared for the growth rebounds. We invite you to talk with your advisor to see how the Rules Based Strategy can work for you. We would encourage you to take advantage of one of the many dinners and workshops we offer, or simply give us a call at your convenience. Ultimately we are working to earn and preserve your trust as financial advisors and we firmly believe that trust comes from understanding. If we can help you in any way to better understand our Rules Based Strategy, please contact us today!

Investment Advisory Services offered through Sound Financial Strategies Group, Inc. (“SFSG”), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies. 

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by APW Capital.

Neither diversification nor asset allocation can ensure a profit or protect against a loss. Past performance is not indicative of future results.

Protection is positioned as an investment goal. Investing in certain securities may help to hedge against certain risks, but does not imply any guarantee from loss.

*Ciolli, Joseph. “More Wall Street Strategists Are Cutting Their S&P 500 Estimates.” Feb 6, 2016. 107819 05-10-2018

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