Black Monday! 30 Year Anniversary of the 1987 Stock Market Crash

Dear Mr. Market:th-10

You’ve had some wild days but perhaps none were as volatile or memorable as October 19, 1987! 30 years ago today you plunged -508 points for a record -22% decline in just one day! By today’s standards the 508 point decline wouldn’t be something to celebrate but wouldn’t really move the needle too much; only about a -2.2% decline. Believe it or not we’ve now endured drops like this 17 times since then!

Speaking of today, however, what would it look like if we had another stock market crash? If the stock market lost -22% in one day we would see the Dow Jones drop about -5,094 points as of today’s close.

We have two questions for you with regard to this not so pleasant walk down stock market memory lane: Continue reading

Marijuana Stocks: Growing like a weed?!

Dear Mr. Market:th

Many of our “letters” to you are with a cautionary approach so that readers of this blog fully understand the risks and rewards of engaging with you. With your erratic personality perhaps the last thing you need is a drug to add to your volatile ways. That said, we also attempt to sprinkle in some humor and puns to get our point across…even if you’re at an all-time high (first pun in case you’re not paying attention!).

Whether you are a proponent of legalizing marijuana or not there is no denying that the cannabis industry is real and here to stay. Would it surprise you to learn that cannabis is the United States’ second largest cash crop? Believe it or not it is the second most valuable industry next to corn and is worth over $40 billion! Several reports earlier this year also estimate that legal cannabis sales could grow by at least 30% in 2018.

The marijuana industry is predicted to grow like a weed (second pun). All kidding aside, the Bureau of Labor Statistics (BLS) projects over 250,000 new jobs in this industry by 2020 which is far more than those expected from manufacturing! By 2024 the BLS actually forecasts manufacturing jobs to decline by 814,000. Ignoring the potential growth in this industry or that it has fast become a major economic driver and job-creation force in the U.S. economy is a mistake.

Public opinion is still divided (not a surprise nowadays…) but it’s rapidly changing. A poll conducted by CBS News in July of 1979 revealed that only 27% of those surveyed thought marijuana should be legal; that number by mid 2017 is now at 61%. Even with this momentum there still remains some obvious hurdles: (1) Marijuana is still illegal at the Federal level and (2) Congress has plenty to focus on right now with healthcare and tax reform so legalization is a lower priority for now.

So…how do you play this opportunity, or should you???th-11

If you’re a true investor as opposed to a speculator we’ll begin by letting you know there are major risks in this budding sector. (please tell us you caught that pun?!) Continue reading

Mr. Market Meets his Match! Introducing the Columbus Adaptive Asset Allocation Strategy

Dear Mr. Market:th-9

Guess what? You win. Yes…Mr. Market, you win! It won’t take another bear market or adding further gains to recent stock market highs for you to prove to us that no matter what the environment is you are going to make fools out of many brilliant people.

The beauty of your victory (at least for you) is that there will always be a market and a debate to engage in. The age old argument of “Active versus Passive” will rage on indefinitely.

Active Money Management (hands on approach with the goal of beating markets and taking advantage of short-term price fluctuations)

In one corner we have the ‘crystal ball crowd’ that thinks they can outsmart you and time the stock market. “Buy low and sell high”, right? If only it were that simple and if only someone could get it done successfully more than once. Mr. Market has us human beings in the palm of his hand because he knows we all have one thing in common; we’re emotional creatures! Some of you will read or hear news and act on it. Worse yet…you’ll rely on your gut instincts or a “hunch” because after all you were right once before. You are Mr. Market’s perfect candidate…Take another sip of false confidence and brace yourself for his eventual knockout punch which you won’t even see coming.

Passive Money Management (hands off approach with a goal of matching markets by using index funds/ETFs and not reacting to every market move)

On the other side of the room is the buy and hold crowd (or sometimes the ‘buy and forget’ group as we like to call them). Sure…on one hand a true investor should indeed be patient and allow an investment to pan out over time. Some clever sayings come to mind such as “It’s about ‘time in the market’ not ‘timing’ the market.” While we lean towards this overall investment philosophy there are times when it can go drastically wrong. If you have a lump sum or healthy chunk of cash right now and we’re at all-time stock market highs, do you just dump it all in right now?

So this leaves us to ask what the ultimate answer is to the question: Which is best…Active or Passive money management?

The foundation for any well performing portfolio is its asset allocation. We’ve written extensively about this before but over 90% of a portfolio’s performance is determined by how it’s allocated. Another way of looking at this is that you could pick poor individual investments (stocks or funds) but be in the right areas (asset classes) and do just fine. Like all things in life there needs to be a balance between discipline and the ability to adapt to changing environments in order to truly be successful. We believe we have found this with an Adaptive Asset Allocation Strategy.

Columbus Adaptive Asset Allocation Strategyth-8

Over the past year My Portfolio Guide has been working with Dimensional Research and its development of the Columbus Adaptive Asset Allocation Strategy. We are proud to announce a formal engagement with them and in doing so will be exclusively offering the Columbus strategy to our clients as part of our investment platform.

The Columbus Adaptive Asset Allocation Strategy is a quantitative methodology that is designed to adapt to the markets as they constantly change. While it’s suited for clients seeking equity like returns, one of the primary goals of this strategy is to minimize drawdowns during rough markets. It’s ideally positioned for portfolios over $100,000.

What’s under the hood of the Columbus Strategy? 

First and foremost, as big fans of ETFs we wanted a strategy that would be able to use widely recognized ETFs that were liquid and also in most cases commission free under our Institutional arrangement with TD Ameritrade. The strategy consists of a universe of 15 ETFs representing major asset classes. It rebalances once per month and can invest in up to eight ETFs depending on what the algorithm is positioning the strategy for relative to the market environment. Click this link  Columbus Strategy Overview to learn about which specific ETFs it uses as well as some unique aspects to how we have set maximum exposure limits on each asset class.

It is possible for the entire portfolio to take an extremely defensive posture and only be in one asset class (cash). The strategy dynamically adjusts and rates each ETF on volatility, momentum, and the overall correlation of returns to the portfolio. We’ve long said that it’s easy to buy investments but very few people are adept at selling them. The proprietary algorithm in this strategy is primarily designed to reduce the risk of huge drawdowns while still trying to capture market upside when appropriate. The main goal is to achieve the most optimal risk-adjusted return.

Behind the Numbers: (Performance and most recent Monthly Rebalance)

Speaking of returns…just how well has the Columbus Strategy performed? Not only is performance where the “rubber meets the road” but the summary below gives you a concise snapshot of how we’re positioned in September. (click link below to view)

Columbus Adaptive Asset Allocation Strategy – September 2017

We plan to report performance each month but in order to be fair to our loyal clients in the strategy…regular readers will see the rebalance on a one month delay. (we can’t give away the “secret sauce”!) If you’re interested in receiving the reports when they’re first published or want us to manage one of your portfolios using the Columbus Strategy contact us via phone at (888) 474-8433 or email your inquiry to info@myportfolioguide.com.

Obviously the Columbus Strategy boasts some impressive returns. Back testing the strategy to May of 1998 you’ll note it returned +10.51% annualized returns versus the S&P 500 at +9.37%. Comparing it to a more diversified benchmark we have chosen to track it relative to the GMO Global Asset Allocation Fund (GMWAX) which over this same time period returned +3.92%. The main reason this strategy has grabbed our attention is not just for beating the markets long-term…but rather on how well it played defense during turbulent times. The Columbus Strategy had drawdowns under -10% relative to the Global benchmark at -31.87% and the S&P 500 at -51.49%!

What about during REALLY bad markets?! (Dot-Com Crash and the Financial Crisis)

Side stepping one or two rough stock market patches usually is at the core of hot marketing strategies. A real strategy is one that can exhibit repeatable characteristics in all sorts of different crises and especially so during ones that were brutal. Perhaps there are no two better examples than the Dot-Com Crash and the Great Recession/Financial Crisis of 2008. Columbus_Historical_Events_Analysis on how the Columbus Strategy did during those historical events. It’s remarkable how the portfolio shifted to less volatile asset classes such as cash/money markets and Fixed Income (bonds/treasuries etc). For a more detailed look and an overlay versus the S&P 500, specifically look at pages 3 and 4 in the above link. Lastly, we’ve also had this strategy back-tested* for other unique events such as the stock market crash of 1987. Contact us for details if you’re curious about a specific time period or market event.

*Keep in mind that for some older back tests the strategy had to use proxies for the ETFs since many did not exist at that time. For your reference click this link to see a list of those proxy funds Columbus Proxy Mutual Funds Universe .

In summation, we’re extremely proud and excited to offer this dynamic investment strategy! Our next report on the Columbus Adaptive Asset Allocation Strategy will be an update at the end of the month. You’ll see a report tracking how a $1 million portfolio is performing using this exact strategy. Again, seeing actual trades and real-time rebalancing will be reserved for our clients but feel free to inquire for more details or get set up to have your account managed professionally. Obviously not every investor is a match for this type of portfolio management but we would bet that it likely beats what you or your current financial advisor are offering you now!

Have a great remainder of the month and see you next time!

Managed Futures: 5 Questions to Understand

Dear Mr. Market:

What’s your plan for when the stock market goes down? Is this plan the same for when bonds go down? Over the last several years of this bull market we have gradually prepared for this inevitable event by establishing a strategy in advance as opposed to one that is reactionary or emotional.

After reading this article we ask that you do something different the next time the sky is falling. Tell yourself that before the next market crash you won’t have fear, panic, or emotions guide your strategy but rather follow an intelligent plan.

One way to hedge your portfolio against serious drawdowns is by using alternative investments such as Managed Futures. The following five questions are from an interview by US News with Cliff Stanton, CFA and Co-Chief Investment Officer at 361 Capital:

What are the potential benefits of investing in futures?Cliff_final

The primary benefits that managed futures strategies offer are: Continue reading

Westcore Fixed Income & Bond Market Interview

Dear Mr. Market:

th-3We certainly spend a lot of time writing to you about the stock market and all the twists and turns it brings investors. Today, we have the pleasure of mixing things up a bit as we dive into something far larger and more intricate than the stock market; we’re going to talk about the bond market!

On a recent trip out to Denver, CO My Portfolio Guide had the opportunity to meet with Troy Johnson, CFA and Director of Fixed Income Research at Denver Investments. We were able to ask him and his team several questions about the bond market and how they’re navigating it in these interesting times.

My Portfolio Guide: First and foremost, thank you very much for making yourself and your team available. As you know, we own positions in the Westcore Plus Bond Fund as well as the Westcore Municipal Opportunities Fund. We understand your team was awarded a Lipper Award. Without necessarily giving us a pitch on your firm, could you briefly expand on the recent accolades?

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Westcore: The Westcore Fixed Income funds won the Lipper Fund Award for best fixed income small fund group for the three-year period ending November 30, 2016, placing first out of 74 eligible fund families. The award was granted based on Lipper’s measurement of risk- adjusted returns across our multiple fixed income fund offerings. We believe that winning the award affirms the soundness of our approach across multiple strategies as well as the hard work and talent within our fixed income team.

My Portfolio Guide: Excellent, and congratulations on the awards and success. Related to this, could you share your opinion on what makes your firm or approach different than some of the larger bond shops?

Westcore: We utilize an investment approach that emphasizes income and security selection rather than a focus on trading. This generally results in a heavier weighting towards credit oriented issues that offer enhanced income. We recognize rigorous fundamental research is a necessary component of such an emphasis and differentiate ourselves within that process in the following manner: Continue reading

March Madness: Final Four Investing Bracket 2017

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Dear Mr. Market:

Is your bracket already busted? This year’s March Madness tournament opened up with very few upsets until this past weekend. Much like the stock market, we see a similar trend happening right now. What follows is how we see things panning out but first, here’s a little background on how one of the most famous sporting events in the United States correlates to the investing landscape.

Seven years ago we became the first Registered Investment Advisor to use the NCAA basketball tournament as a way to show our readers a forward-looking view on the stock market! We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

CLICK THE LINK TO VIEW OUR Final Four Investing Bracket Picks 2017

Large Cap

Last year started off much differently than 2017 and as we wrap up the first quarter …some trends are emerging while others continue. If you eyeball the overall theme of this years bracket it will become clear that we’re picking some stocks that should continue to do well under the Trump administration. Whether you love him or hate him, ever since Donald Trump assumed office, the stock market has risen. The proverbial “Trump bump” is real and while we personally believe he needs to stay away from Twitter, there is no question that the stock market and certain economic sectors are primed to perform. Continue reading

10 Rules on Stock Picking

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Dear Mr. Market:

We’ve written countless letters to you on the ups and downs of the stock market. This time, however, we’d like to share some ‘rules of the road’ and a guideline on how to pick stocks regardless of the environment you’re presenting us.

Click here to read the latest white paper written by My Portfolio Guide, LLC.

Cheers!

PS- If you have questions or would like more information on this white paper or others…please send us a note below: