Understanding Formulaic Investing & Market Trending

What is a "Portformula® Investment Strategy?"

The word "Portformula" is a name used to describe a collection of unique investment solutions. Portformulas® combines two words to form a unique, new word — it is a PORTfolio that is managed by a specific investment FORMULA, rather than a human money manager.

A Portformula Investment Strategy is a privately managed portfolio that makes investments in common stocks, bond funds, Exchange Traded Funds and preferred stocks. The investments themselves are not what makes Portformulas so unique, but rather "HOW" strict formulaic criteria is applied to determine "WHAT" investments qualify for each Portformula.

Each Portformula strategy includes a specific quantitative, mechanical formula to which it adheres when making the investment decision. This is a very forthright and transparent approach that allows investors to always know exactly what they own inside their portfolio, unlike traditional "human" money manager directed portfolios where changes can be made without you even knowing "WHY."

Portformulas Investing believes that removing the human element as much as possible from the investing equation will present a more systematic approach to investing. This belief is based upon numerous studies performed looking at the negative impact that human behavior and emotion can have on a portfolio.

Each Portformula strategy is 100% transparent, meaning you’ll always know "WHAT" you own, and "WHERE" your investment is currently allocated. In addition, each Portformula strategy is 100% liquid and carries no front-end load or back-end surrender charges.

"Recession and Market" Allocation Management

Having a formulaic approach to purchasing securities is only one half of the story. Portformulas offers an added feature designed to protect against potential downturns in the stock market. This patent pending feature is known as "Recession and Market" Allocation Management, also referred to as RAM® Score. The term "score" is included in the name because this feature utilizes an elaborate scoring methodology to measure a number of different metrics in the stock market and the overall economy, including measuring the risk of recession, volatility in the stock market, moving averages and other important subcomponents.

Each month, this patent pending scoring feature provides a "snapshot" view of the overall stock market. When the score is negative, it triggers funds within Portformulas to a defensive position away from equities. This feature proved to be invaluable for Portformulas investors during the Financial Crisis of 2008, having allocated them to a money market fund or a bond fund in December of 2007 through August of 2009–a period of time when the S&P 500 was down -31.09%.

The "Recession and Market" Allocation Management feature offers an investor one more potential benefit to investing in Portformulas® which could be very valuable in protecting your portfolio. It is an option that can be added to any Portformulas strategy at no additional cost.

What is "Market Trending?"

The first decade of the 21st century has taught us that the "Buy and Hold" philosophy requires an extensive amount of time to rebuild a portfolio after significant losses in the market. As an alternative to "Buy and Hold," many investors and financial advisors have resorted to "Market Timing" in an effort to "time" the bottoms and the tops of the market. This strategy has proven to be a higher risk with greater inconsistency.

"Market Trending" is a different type of approach that shares some of the positive characteristics of both philosophies. Historically, it is easy to look at charts of the stock market and point to upward trends and downward trends. It goes without saying that if you could be invested in the market during the upward trends and be repositioned in a more secure investment during the downward trends, you may experience greater long term success.

The challenge is in identifying what may likely happen in the months and years to come. The goal of market trending is to verify trends and act upon them. However, unlike market timing, market trending is not a reaction to the market, nor is it a daily buy/sell routine in efforts of predicting whether the market will go up or down next. Instead, market trending seeks to identify longer term trends to potentially increase your odds for long term success. Using Portformulas with RAM® Score is similar to planning out a good day of the week for golf by looking at the extended forecast. Although you can’t guarantee that you’ll enjoy a beautiful day on the course, you can decrease your chance of experiencing a stormy day.

What About “Buy and Hold?”

Did it Work for You?

Even if you have experienced downturns in the stock-market, it is still important to have a long-term perspective on investing. However, doesn’t it make sense to utilize an unemotional investment strategy that offers a feature that may protect your exposure to the stock market during downturns by re-allocating funds into more secure investments? Would you have liked having an investment that may have side-stepped periodic downturns? Meet with a qualified Portformulas professional today and see if an investment in Portformulas may be right for you!