The Dynamic Strategy we employ brings several distinct advantages
in the portfolio management process
“We believe every portfolio should have some form of Tactical / Dynamic approach.”
Why Matt Pavich Alpha Management
The Dynamic Strategy we employ brings several distinct advantages to the portfolio management process. We look for opportunities on a weekly to monthly basis. Most money managers employ a Strategic Strategy which is better known as Buy and Hold (B&H), a long term one decision method. The Tactical Strategy is anin between process.
We believe every portfolio should have some form of Tactical or Dynamic approach. Just as it makes sense to diversify among asset classes it makes sense to diversify among strategies. Buy & Hold is a long time Wall St. mantra most investors have bought into. A mostly one decision strategy is clearly appealing for its simplicity. The irony is most Wall St. trading desks employ strategies which are the antithesis of B&H.
“Another reason to choose MPAM is to avoid severe draw downs.”
Limit Draw Downs
Another reason to choose MPAM is to avoid severe draw downs. Generally B&H managers can only have a modest amount of cash in their portfolio. Consequently when the market is in a severe correction options are limited.
MPAM can move to 100% Gov’t Money Market, on a daily basis if necessary, which is a risk-less position. The platform also has access to a Treasury Bond Fund which usually is a flight to quality option during downtrends. If the signals are strong enough Inverse Funds are also available in the fund group.
The early spring 2020 Covid Correction witnessed the S&P 500 fall 34% in five weeks. During the same period the Alpha I portfolio lost 0.5% and Alpha II gained 15.3%. Limiting these type of Draw Downs are important in improving long term performance and preventing investors from exiting the market at the wrong time.
“Equity valuations are at some of the highest levels ever.”
Equity valuations are at some of the highest levels ever. The Shiller PE Ratio (an average of the previous ten years) is at its second highest level ever, only eclipsed by the Dotcom Bubble.
Legendary investor Jeremy Grantham periodically calculates current financial market valuations and uses history to determine the probable returns of various asset classes in coming seven years. Both domestic equities and bonds are projected to have a negative real rate of return. Very low probability B&H will be profitable during this period. The table and insightful article “Waiting For The Last Dance” can be accessed here. Dated 9/30/21 – Source:GMO
CAPITAL GAINS TAXES
The Biden administration is planning to eliminate or at least drastically shrink the benefits of long term capital gains taxes. That will reduce the need to hold securities for a year to qualify for the lower rate. The capital gains tax rate was a distinct that the B&H strategy possessed in their back wallet pocket. Apparently no more?