Ed Easterling, the founder of Crestmont Research and author of Unexpected Returns, Understanding Secular Stock Market Cycles is the person that coined the phrase “Sailing and Rowing” to describe a secular bull and bear market. In otherwords his thought is to open the sails in a bull market yet bring in those sails and start rowing in a bear market or take advantage of sailing and rowing at the same time(it’s hard for the average investor to know when one is in a bull or bear market, heck it is hard for professionals!)
My last blog piece discussed the premise that 70% of return according to Roger Ibbotson, can be attributed to market volatility and the decision regarding how much market exposure you can handle is the most important piece of the puzzle. So what does all this mean? When you construct your portfolio you could just buy and hold, however your volatility will probably be at it’s maximum level and when a bull market also zips in a cyclical bear market are you prepared emotional for the downturn? Easterling feels one can potentially protect their portfolio from drastic downturns while also grabbing some potential upside that a secular or cyclical bull market offers. How? By reducing volatility through various asset allocation mandates. These mandates would include Relative Return(buy and hold with a tactical strategy) and a unconstrained tactical strategy along with absolute return which includes alternative asset classes. These three asset allocation mandates could potentially reduce market volatility while meeting your investment management goals.(Asset allocation does not insure a profit or protect against a loss)
My last article will provide you results compiled by Zephyr Style investment software. Stay tuned!!!!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.