DWM Integrated Core Aggressive
Maximum Equity Exposure = 100%
Model Investment Strategy:
To apply a tactical strategy to the international and domestic equity and bond markets. This model utilizes Sectors,1 Style Boxes,2 Internationals,3 and the Money Market,4 each at the optimum time. The time is determined by integrating the overall market environment into the model (explained below).
Preferred investment choices on any platform:
• All six Style Boxes,
• Sector representation,
• A variety of Internationals
To find out if your current platform offers sufficient investment choices for DWM to manage and add value, please call (303) 471-5189 or e-mail Troy.Schield@DWManagement.net where initial consultations are always FREE!!
Building on its real-time portfolio management experience, DWM has since 1989 applied quantitative analysis in building a diversified model using the investment options available on just about any platform. Unlike a fixed allocation, the Integrated Core Aggressive model is tactical. Equity selections and exposure are adjusted as market conditions change, and model positions are monitored and adjustments made when warranted. The goal is to build a diversified model that allocates assets into funds demonstrating greater relative strength and momentum (leaders) while avoiding the lagging funds that drain portfolio performances, building a diversified portfolio to out-perform the broad market indices over time with less risk.
The DWM Integrated Core Aggressive Model strives to identify the top four performing equity funds within the investment options available on any platform, representing several different investment asset groups (Style Boxes, Sectors, Internationals, and others if available), and to apply a tactical rotation to the strongest asset groups and avoid the laggards, with the flexibility to change the asset mix as market conditions change. To determine the right funds, DWM begins with its proprietary relative strength analysis, developed over 20 years of real-time portfolio management experience. Using this time-tested investment tool to identify leading asset classes and ranking all the individual funds within those asset classes to find those with the greatest potential for appreciation given current market conditions. By striving to identify the strongest funds, the goal is to target those funds that represent the best potential for growth.
Additionally, the model strives to be in the “right funds at the right time”: this is Risk Management! Based upon the weight of the evidence from our broad-based market indicators, the model will be fully invested in equities during an indicated bull market and only 50% equity exposure during an indicated bear market.
The heart and soul of quantitative analysis is relative strength. It is the use of mathematics instead of intuition. It is the analyzing of hard facts rather than expectations; the study of what is actually occurring, not forecasting. It is an unemotional, disciplined approach to investing. The true value of relative strength analysis is in identifying the leaders for portfolio inclusion and identifying the laggards for portfolio avoidance.
Determining the Overall Market Environment:
The model aggregates the signals of over 100 trend and momentum indicators of a broad array of equal-weighted sub-industry group price indices. Trend indicators are based on the direction of a sub-industry’s moving average, while the momentum indicators are based on the rate of change of the sub-industry’s price index. One of the advantages of this type of model construction is that the model reflects the price action of the broad market rather than only the very large capitalization stocks, which tend to dominate the S&P 500 and other indices. Additionally, by including many indicators together in the composite, you find the weight of the evidence regarding the market trends and momentum rather than relying on only one or a few indicators. The overall market environment aggregates the signals of the +100 component indicators and generates a reading between 0% and 100%, reflecting the percentage of the component indicators which are currently giving bullish signals. Based on what range the model’s reading falls in gives a reading of both bull and bear market environments.
Conclusion:
The primary goal of the DWM Integrated Core Aggressive Model is to out-perform the benchmark index with less risk relative to the return. The principles of relative strength are applied to the DWM Integrated Core Aggressive Model and the returns are compared to the S&P 500 Index. Relative strength adds value along with the overall market environment: this is a disciplined process to improve the risk and return for an international and domestic equity portfolio with an aggressive tactical model. While the common wisdom is to diversify investments across all sectors and Style Boxes at all times, history has shown that major market rotation exists: this presents investment opportunities. By employing relative strength one can add value by identifying the leader in an uptrend and avoiding the laggards in Style Boxes, Sectors and Internationals in certain market environments. In a bearish market environment it is simply best to build a position in the safety of the Money Market.
The program is available on almost all platforms, and I can manage your account within your 401(k). Please call (303) 471-5189 or e-mail Troy.Schield@DWManagement.net so I can perform due diligence research for you.
(1) Funds that concentrate investments on one industry such as utilities, health care or technology. These funds tend to be more volatile than funds holding a diversified portfolio of securities in many industries.
(2) Funds that diversify securities in many industries, but concentrate their holding in the following six areas: Large Cap Growth, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth, and Small Cap Value. A two-step process determines which of the following six categories the fund falls into. The first step determines market capitalization as Large, Mid or Small by studying the size of the companies the fund is investing in. Industry Standards are as follows: Large Cap is the top 5% of the 5,000 largest stocks, the next 15% are considered Mid Cap, and the remaining 80% are considered Small Cap. The second step is to determine growth or value. Growth investments typically have comparatively high P/E (Price to Earnings ratio) and price to book ratios. These investments are expected to have earnings that grow faster than the average investment. Value investments typically have lower P/E and price to book ratios. Value investments often represent turn-around opportunities, disappointing news or lower growth expectations. Combining the two (market capitalization and growth or value) determines the category the fund falls into.
(3) Funds that represent investment in securities of a number of countries, usually excluding securities of the United States. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Additional risks may be associated with emerging market securities, including illiquidity and volatility.
(4) Funds that represent investments in short-term debt with an objective to earn interest while maintaining a consistent price.
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