Understanding Risk is The Key to Success
There are many factors that cause the prices of stocks, bonds, mutual funds and other forms of investments to fluctuate. Interest rates, inflation, deflation, legislation, foreign exchange rates, political unrest, natural disasters, trade imbalances and employment rates are just a few. These factors all contribute to volatility in the market – volatility, which contains the potential for risking loss of capital.
Avoiding Loss of Capital is The Key to Long-Term Success
Since every market fluctuation contains the potential for gain or loss, the most successful strategy would be one that protects your capital when the market goes down. Successful investing depends on what type of investments you hold, investment techniques and the duration of the investment. Many times the difference between holding too long, or not holding long enough, is the difference between satisfactory gain or painful loss. In a sharp market decline, it does not take long before you start losing principal, and it may take a long time before you gain back those losses.
Despite the disturbing fluctuations, the stock market has continued to go up over the long run. But during market cycles of 3 to 5 years, and often longer, volatility can wreak havoc on an investor’s need for reliable growth or income. For no matter how high the market is today, experience tells us that tomorrow could be another story.
Dynamic Asset Management
Our investment philosophy recognizes that market conditions are ever-changing and we do not believe that making a single investment decision to buy stocks or mutual funds for the long term is effective risk management. A passive approach to investing is high-risk, and exacts a heavy toll when markets collapse. We have learned that investing on the basis of return needs to be balanced with an individual’s tolerance for risk. One way to achieve this balance is to diversify your portfolio among several dynamic asset managers.
There are many successful managers who use skill-based active money management strategies to control risk. We are constantly seeking the most talented managers to be part of The Sage Capital Advisors Network. Our goal is to provide access to the world’s best tactical asset managers who have sound, disciplined strategies that seek to protect as well as grow assets in changing market environments.
Dynamic Asset Allocation
Dynamic Asset Allocation, also known as Tactical Asset Allocation, is an active investment approach that distributes assets among the different asset classes in domestic and international equity, bonds investments and money markets. That distribution is adjusted on a continuing basis in response to market and economic conditions, based on the manager’s perception of the return potential and relative risk of each asset class.
Dynamic asset allocation, like a "fixed" asset allocation strategy, seeks to reduce risk through diversification among different investment categories. Using dynamic asset allocation, however, managers select or weight investments based on those categories with the greatest perceived potential for superior returns, given current market conditions. The allocation of assets becomes dynamic (tactical) by changing in response to market conditions and perceived opportunities for profit.
Dynamic asset allocation makes good sense because the financial markets tend o move in cycles. The dynamic asset allocator uses technical and/or fundamental analysis to identify where the market is in a cycle and what investment categories appear to have the strongest potential for appreciation.
The objective to dynamic asset allocation is to reduce risk by a greater amount than return is sacrificed and achieve real growth after taxes and inflation. Eliminating risk from a portfolio is very easy. All one has to do is buy Treasury bills. But the lower risk comes with lower returns. Dynamic asset allocation is a strategy for managing risk without unduly diminishing returns and it works well with mutual funds. Using mutual funds in a dynamic asset allocation strategy further reduces risk by providing instant diversification across hundreds of securities within each asset class.
By applying Dynamic Asset Management Sage Capital Advisors can help
- Preserve Capital During Market Declines
- Reduce Investment Volatility
- Gain Higher Returns with Lower Risk
Sage Capital Advisors, Inc (“Sage”) is registered as an
investment advisor with the Office of Financial Regulation of the Florida Financial
Services Commission. The information and opinions contained in this document
are for background purposes only and do not purport to be full or complete,
and is subject to change. No representation, warranty, or undertaking, express
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should discuss your individual circumstances with a tax, legal and/or accounting
professional before making any decisions.
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