Stop the Insanity — An Investment Strategy That Matches 21st Century Realities
By Jason W. Veinot
You’ve worked hard to get where you are. You’ve saved, invested, planned and prepared. But what if everything you have learned no longer applies? What if there is a better way?
Our world constantly changes. The telephone has moved from your home to your pocket. Hulking black and white TV sets that sat on the floor are now sleek panels hanging on your wall. Cars drive themselves, texting has replaced talking, and Wi-Fi is a must wherever we go.
Technological advances affect all parts of our lives… even the stock market.
In 1952, University of Chicago doctoral student Harry Markowitz wrote his dissertation on Asset Allocation – which has become the gold standard used by most financial insiders and millions of retail investors every day.
Asset Allocation calls for diversifying risk by combining different investments based on historical, long-term data.
This strategy is designed to determine a specific percentage for each holding within a portfolio and then hold for the long-term during all types of market cycles.
Many market scholars and analysts believe this 65-year-old, 20th century approach no longer works in the new global economy.
What has broken the system?
1) High speed computer trading. It now drives over 70% of the markets daily trading volume
2) Online investing. Millions of new individuals have joined the game
3) 401(k) and employer plans. These have brought billions of dollars into the market from everyday Americans
4) Interest rates. All-time lows have greatly reduced long-term growth potential of bonds and increased their potential for loss
5) Terrorism. It’s a daily threat that destabilizes markets
6) Debt. Average Americans carry more debt than ever before.
These factors have affected the way the stock market performs by:
- A) Nullifying the potential of bonds as a safe, long-term hedge against stocks
- B) Reducing the advantage of using different investments to reduce risk (known as correlation)
- C) Increasing volatility potential
- D) Forcing low-paying cash positions that fail to keep pace with inflation.
This means that traditional investing methods such as buy-and-hold, asset allocation and diversification no longer apply.
In 1997, the Compass Institute was formed to address the growing flaws inherent with traditional investing approaches.
The Institute’s mission was to identify an updated strategy that was safe, objective and repeatable while aligning with current market conditions to optimize performance potential.
After five years of intensive research, a new allocation strategy was developed to provide the desired results – Adaptive Allocation.
This approach is designed to “adapt” to short-term market cycles and align one’s portfolio holdings with current market conditions.
Rather than relying on historical long-term performance measures like traditional Asset Allocation, Adaptive Allocation focuses on current short-term trends and volatility to increase areas of strength and reduce areas of weakness.
Still, too many investors rely on old traditional methods while expecting different results.
Albert Einstein called that kind of thinking the definition of insanity.
We at Enhance Wealth are on a mission to help people understand why traditional investments strategies – once tried and true – are no longer the best approach.
Instead, a method based on current economic realities can work better.
That’s why we call it – Stop the Insanity!
To learn how you can Stop the Insanity! and benefit from Adaptive Allocation, contact Jason Veinot at (859) 231-6622 or visit www.enhancewealth.com.
All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. Advisory services offered through Enhance Wealth, a member of Advisory Services Network, LLC, 1040 Crown Pointe Parkway, Suite 840, Atlanta, GA 30338. 770-352-0449. Insurance products and services offered through Enhanced Capital, LLC. Advisory Services Network, LLC and Enhanced Capital, LLC are not affiliated.