It Starts with a Process
It’s easy to make short-term money in the market. With a bit of luck, anyone can place a winning trade.
It’s not so easy to make money in the long run, or to make any kind of consistent money in the market. Being able to make money month after month, year after year, and have consistent profits – that’s a lot harder. To do that, you need a process.
A process defines what you will do, how you will do it, when you will do it, how you will evaluate it, and how you will modify it. A good investment plan includes all of these things. The plan can be considered a guide to your process.
Once you have that good plan, discipline is “simply” a matter of following that plan.
InvestSURE Process using Relative Strength Investing
You want to be SURE that when you invest your hard earned dollars that you are making the right decisions, not only in terms of what you invest in, but also the timing of when you invest.
We believe it’s not participation in the markets you should be wary of; it’s participation without a plan. Excessive risk comes from speculation, theory and prediction. Our way of creating the reliability that you need from your investment capital is by using a rules-based investment process.
Start with a System
Many of our clients are saving for retirement, running a business, or both. They want to offset the risk to which they’re exposed while they build up their wealth, and placing their assets in a market that is erratic and volatile isn’t always the most attractive option.
At the root of the investment process is our analysis and ranking system called Relative Strength. Individual investments are selected based on supply and demand, price flows and, ultimately, what is doing well relative to everything else.
Relative Strength is about keeping a mix of investments that reflect what is strongest at the moment in comparison to other investments. By focusing on strength and staying away from weakness, we avoid the investments that can lead to portfolio disaster.
Step 1: Essential Risk Management
Risk when investing is defined as the chance of losing money. The easiest way to make money is to not lose money. Selecting the strongest investments helps us to protect against risk, but it also leads to the most important risk control function in Relative Strength Investing: The Equity Action Call.
The Equity Action Call determines when we should own equities and when we should be on the sidelines. It becomes our stoplight. When the blue indicator line is in the green zone, we want to own equities. If the green indicator moves to the yellow zone, weaker positions are sold and only the strongest investments are held. If the indicator line moves to the red zone we move out of equities.
We have prepared a short video explaining the concept of Relative Strength Investing (click to view).
Investing in today’s complex markets can be difficult and confusing. Volatility is a top concern for most investors: it is difficult to predict, but it is an inevitable reality of financial markets. An active investment approach that protects capital during prolonged downturns and flexible enough to focus on the most appealing opportunities offers investors a risk-managed alternative to traditional investment solutions
Benefits of the Equity Action Call:
- Indicates when to move out of equity market before downturn
- Instructs to re-enter as market strength returns
- Avoids the losses of market crashes and benefits from growth of bull markets
- Protects your portfolio from significant investment risk
Step 2: Asset Class Selection
Everyday we rank the seven major assets classes, which include Canadian Equities, U.S. Equities, International Equities, Bonds, Commodities, Currencies and Cash.
Money does not leave one Asset Class without finding a home in another. Picking the strongest asset class is not only responsible for the majority of your returns; it also helps to further reduce your risk by avoiding areas of the market that are out of favour.
Step 3: Individual Security Selection
The Strongest of the Strong
The same ranking process used for asset classes is also used to classify sectors and individual investments, which means your portfolio is stocked with the strongest of the strong at any given time.
Each investment is purchased when it has high relative strength, held only as long as it retains that high ranking, and sold at a profit before supply and demand drives it downward again. As soon as we move out of one investment, we move directly into another and do the same thing. This happens over and over, on a consistent basis.
Go where the money is
Investments with the most relative strength are on their way up and are likely to continue rising. That’s how we end up with a portfolio full of low risk investments that together can generate healthy progress toward your growth goals.
Your day-to-day is covered.
Your financial focus is on the long term –your family, your business, your retirement– what little spare time you do have shouldn’t be spent wondering and worrying about everyday investment decisions.
The Relative Strength approach is implemented through a software system, simplified with rankings and colour codes, and programmed with pre-set criteria for buying, selling and rotating asset classes, so that you don’t have to question the day-to-day movement in your portfolio.
Bringing Strategy to Fruition
Relative Strength investing is about building on tried and true principles like supply and demand analysis, to create a clear system for participating in the markets. Still, its full value is realized only once it becomes part of your bigger picture.
That’s when you can start moving toward your objectives with more consistency, controlled risk, and a solid understanding of your portfolio. Our 6-step process is our way of bringing Relative Strength investing into your life, and into practical use.