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In coordination with Dorsey, Wright & Associates (DWA), I offer three systematic investment programs utilizing Exchange Traded Funds (ETFs). For more information on ETFs, please visit the USEFUL LINKS section.
1) ETF SECTOR MANAGER (Conservative - Moderate)
2) ETF TACTICAL ASSET ALLOCATION MGR (Moderate - Aggressive)
3) ETF INTERNATIONAL MANAGER (Moderate - Aggressive)
ETF Sector Manager
The allocation in the ETF Sector Manager is based upon the DWA Point and Figure methodology, emphasizing relative strength analysis and calculations. Positions are added or removed when the relative strength signals change in relation to the broad market averages. The allocations are rebalanced within the portfolio and are kept in sectors exhibiting positive relative strength. When the relative strength of a sector shows weakness, the ETF is removed from the portfolio.
ETF Tactical Asset Manager
The allocations in the ETF Tactical Asset Allocation Manager are also based on Point & Figure relative strength signals, as well as trading opportunities as they present themselves based upon the Point & Figure tools. Weightings in the portfolio can vary as indicators dictate if cash should be raised. There are no restrictions on the amount allocated to any one sector.
ETF International Manager
The ETF International Manager portfolio consists of five equally weighted positions from the approximately 30 international iShares ETFs. The ETFs chosen have superior relative strength over the other candidates. If a portfolio ETF becomes significantly out of favor, it is replaced with the strongest relative strength ETF of the remaining candidates. This model is 100% invested at all times.
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In an effort to participate in the upside of strong sectors while minimizing downside exposure (versus the overall broad markets), these three portfolios are actively managed using the strategies described. Over-diversification and broad asset allocation can cause dilution to any portfolio, reducing downside risk, but limiting significant upside as well. Relative Strength measures performance of a sector compared to an overall corresponding index. By focusing on the sectors with strong relative strength, the managed accounts focus on the sectors in favor. When the tide turns, the active approach pursues a new sector displaying stronger indicators.
Sector ETFs are bought and sold based on the relative strength indicators (as well as other point and figure indicators) utilizing the research tools of Dorsey Wright and Associates. The accounts require active management and monitoring to review the indicators and determine what positions should be purchased or sold. Turnover is determined by the volatility of the overall market. For the most part, sectors can trend for years, which creates low turnover, and tax efficiency.
These portfolios are suitable for the long-term investor seeking a diversified approach to growing investments over time, eliminating single stock risk. Exchange Traded Funds, known as ETFs, have the advantages of both index funds and stocks. iShares offer the diversification of an index fund, with each fund representing a basket of securities, yet trade with the ease of stocks. ETFs have numerous benefits, such as tax efficiency, low expenses, trading flexibility and diversification. ETFs are bought and sold on an exchange, as opposed to mutual funds, which are bought and sold from the mutual fund directly. ETFs generally have much lower expense ratios than mutual funds. As well, Mutual funds incur the annual long and short-term taxable distributions of positions that an investor may not have benefited from in the fund.
Your investment strategy will consist of an allocation of your assets to the various Portfolio Option(s) chosen based on a variety of considerations: Risk tolerance, objective, financial situation, investment goals, income needs, time horizon, age, and financial goals.
Types of Investment Risk:
Before making your investment decisions, it's important to understand the types of risk and to know that perhaps the riskiest thing you could do is not invest your money at all.
Types of Risks Associated with Investing:
- Inflation risk is the chance the money you have invested will decline in value as rising prices shrink the value of the dollar.
- Principal risk is the degree of probability that your original investment will decline in value or be lost entirely.
- Credit risk is the chance a borrower will default on an obligation.
- Market risk (or volatility risk) is the likelihood that a broad investment market, such as the bond or stock market, will decline in value.
- Liquidity risk is the possibility you won't be able to sell or convert a security into cash when you need the money.
This advertisement does not constitute an offer to sell or a solicitation of an offer to buy any security. Specific recommendations can only be based on review of a client's individual investment portfolio and financial objectives upon request and with appropriate offering documents. Prior performance is no guarantee of future results.
(The annual percentage fees charged are in line with industry-standard money management fees. It includes the active money management monitoring and decisions, the tactical movement of assets among the sectors, the account platform and reporting, the broker-dealer fee, and the investment advisor representative Scott Brooks. Fee based asset management versus commission driven transactions is often in the Client’s best interest because compensation is not the result of account activity and increases as the account value rises.)
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