Our Flexible Portfolio Method (FPM), as described in "The Evergreen Portfolio," by H. Ron Miller and Martin Truax, is a three-pronged approach designed to help manage risk in a volatile financial marketplace.
FPM begins with a flexible overall strategic asset allocation that represents our secular, big-picture view of financial conditions. This allocation could potentially have a bias towards inflation, deflation, or any environment in between.
The next phase of the process is to build out the core of the strategy, typically comprised of individual stocks, bonds, ETFs and mutual funds that invest in our secular themes.
This core typically represents 70% of the overall strategy and is designed to be a longer-term hold of our highest conviction investments, chosen through careful selection after quantitative and qualitative screening. Fundamental and technical analyses are applied to fill in the core of the strategy, as well as help to identify weak positions for potential replacement over time.
The remaining 30% exposure represents the final phase in our process – our swing allocation. This allocation is actively managed for risk using a disciplined process driven by our proprietary technical analysis. The swing allocations can be bullish, bearish, or flat, and typically use index ETFs, long and/or short, or money market vehicles.
The result of this investment approach is that market exposure can range from a net long 100% all the way down to 10%:
- 100%, when our models are bullish, the swing allocation contains ETFs correlated to the market or stocks
- A range of 70% to 85% when our models are neutral, the swing allocation contains cash or money markets
- A range of 10% to 40% when our models are bearish, swing allocation contains holdings that range from 1 x 1 to 2 x 1 inverse to the indexes we feel best hedge the underlying core of the portfolios. These holdings are designed to increase in value as the market declines. However, there is no assurance that these holdings will properly hedge your portfolio.
We build a series of defensive hedges and strive to manage risk in every market environment.
IPMG reserves the right to target an overall net short position in extreme negative environments.
There can be no assurance that any of the Investment Management Strategies offered through IPMG will obtain their respective objectives, or that losses will not be experienced. We suggest that investors consider investing in several of our strategies in order to create a balanced strategic Asset Allocation. Asset Allocation does not ensure a profit or guarantee against a loss. Past performance is not indicative of future results.
Stock and Bond ETF investors are subject to risks similar to those of holders of other stock and bond portfolios. A primary consideration is that the general level of stock or bond prices may decline, thus affecting the value of an equity or fixed income ETF, respectively. This is because an equity (or bond) ETF represents interest in a portfolio of stocks (or bonds). An exchange traded sector fund may also be adversely affected by the performance of that specific sector or group of industries on which it is based.
Leveraged ETFs seek returns that are either, 2x, -1x or -2x the return of an index or other benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, leveraged ETF returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their holdings consistent with their strategies, as frequently as daily. While leveraged ETFs can be useful in some situations, they can be more expensive and can result in losses to investors and non-correlation to the index for those who hold them for longer than a day. For more information on correlation, leverage and other risks, please read the prospectus carefully.
Although exchange traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the trusts may not be able to exactly replicate the performance of the indexes because of trust expenses and other factors.
Investing in small- and mid-cap stocks generally involves greater risks and, therefore, may not be appropriate for every investor. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets. Asset allocation and diversification do not ensure a profit or protect against a loss.
Investors should carefully consider the investment objectives, risks, charges and expenses of exchange traded funds before investing. The prospectus contains this and other information about the funds. The prospectus is available from your financial advisor and should be read carefully before investing.