Investing Is Hard.
Holding your money in a bank account means losing purchasing power year after year. In order to escape a negative real yield environment you need to invest accordingly.
However, financial markets are complex in nature and emotions like greed or fear are harming the investment process. Further, the popular buy-and-hold approach is only a mediocre solution. History shows massive drawdowns and long periods without positive returns. In these scenarios retail investors tend not to be able to bear the high psychological pressure they are undergoing.
Experience out of working in the hedge fund and asset management industry have shown clear advantages of a more active approach to investment.
The two most important factors in investing are growth and inflation. Changes in their expectations are root causes of repositioning and thus money flows towards more attractive assets. This is creating trends because markets are not perfectly information-efficient (slow diffusion of information), herding behavior exists and the over-and-under reaction of investors additionally amplify movements.
Our investing approach uses those effects to allocate towards positive trends (absolute momentum) and their relative attractiveness (cross-sectional momentum). There is strong academic evidence for both effects in a broad range of assets and in different geographical markets.
In the final step, a sophisticated portfolio construction selects an attractive allocation in terms of risk and reward within the given risk budget.
Implementation And Expections.
The model portfolio adjusts on a monthly basis. It only takes you 10 minutes of your time to bring the portfolio in line with the suggested allocation. (example)
Only liquid ETFs are traded with a narrow bid-ask spread and some brokers even offer commission-free trading in them. Both resulting in minimal transaction costs.
While there is no certainty in financial markets, as well as in life, there is a high probability of outperforming a buy-and-hold portfolio over a full business cycle.
The target is to deliver an average annual return of 10 % over a full business cycle.
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