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. Unfortunately, this strategy has proven to result in higher risk with greater inconsistency.
Formulaic trending is a different approach that shares some of the positive characteristics of both philosophies. If you study the history of the stock market, it is easy to look at charts and identify upward and downward trends that have taken place. It goes without saying that if you could be invested in the market during the upward trends, and be allocated differently during the downward trends, you may experience a more stable outcome. The challenge is identifying what may likely happen in the months and years to come. That is where our patented process enters the equation.
The goal of formulaic trending is to verify trends and act upon them. However, unlike market timing, formulaic trending is not a reaction to the market, nor is it a daily buy/sell routine in an effort to predict whether the market will go up or down in the future. Instead, formulaic trending seeks to identify long-term trends to help provide a more stable investing experience. This is what we do at USA Financial Portformulas. This is formulaic trending.
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