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4Thought Financial Group's Multi-Contingency Investing Methodology
"Our portfolio modeling process starts with creative proprietary research and empirical data analysis. Our findings are used to generate decision making formulas that are able to rapidly and repeatedly analyze vast quantities of raw data and drive our buy/sell/allocation decisions in tune with the specific investment mandates of each of the separately managed accounts offered."
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Learn more about our Multi-Contingency Investing Method
Most of your accounting practice clients probably have one of two types of investment portfolios:
Type 1: An amalgamation of seemingly random and uncoordinated investment instruments acquired at different times from different providers (a “junk drawer” of financial assets).
Type 2: A professionally managed portfolio allocated based on risk tolerance and objectives, and diversified by asset type (using a Strategic Asset Allocation or “Modern Portfolio Theory” approach).
While Type 2 is definitely better than Type 1 (by miles), it’s still only a single method of investing. You and your clients may want to consider broadening your horizons with an approach called “Multi-Method Investing®”. The world of investment management can be broken down into 4 primary categories of investment method that can be used by an investor to attempt to achieve his or her goals, which correspond to 4 types of market environment:
- Liability-Driven Investing and Bear Markets: Characterized by investor fear and declining asset prices, a Bear market will be best attacked using Liability-Driven Investing.
- Strategic Asset Allocation and Bull Markets: Characterized by investor confidence and rising asset prices, a Bull market will be best attacked using Strategic Asset Allocation.
- Opportunistic Investing and Wolf Markets: Characterized by investor uncertainty and volatile or sideways asset prices, a Wolf market will be best attacked using Opportunistic Investing.
- Selective/Concentrated Investing and Eagle Markets: Characterized by investor exuberance and soaring asset prices, an Eagle market will be best attacked using Selective/Concentrated Investing
We’ve found through both proprietary and third party research that no single method is effective in all scenarios, but instead that each approach tends to have a particular market environment or part of the market cycle to which it is very well adapted. Our conclusion is that in order to achieve one’s life goals, one should diversify at the level of investment method, applying the most effective aspects of multiple completely divergent methods of investing, and not be dogmatic about using a single method. This approach effectively adds a whole new layer of diversification to the portfolio (diversification by investment method), beyond the traditional asset-type diversification provided by the “Type 2” traditional diversified portfolio. The end result is an aggregate investor portfolio that is better equipped to handle a wider variety of contingencies. Our research and experience shows that by doing the right investment planning and making practical investment decisions using the Multi-Method Investing approach one can increase the probability that an investor will achieve their financial goals.
If you’d like to learn more about Multi-Method Investing and how it could help your clients, please contact 4Thought Financial Group Inc.
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