How To Outperform - It Starts With...

With the stock market waiting on both earnings and the economy to improve in order to justify current valuation levels, it would appear that traders are basically trying to decide which way to go from here. (IMO, a meaningful break below 2320 would embolden the bears while a move above 2400 would reinvigorate the bulls.) As such, this appears to be as good a time as any to continue our discussion on portfolio design.

So far, we've talked about establishing goals, selecting time frames, and identifying the correct benchmarks. We've reviewed my take on the three ways to generate alpha (timing, selection, and leverage). Now it's time to get to question of how one goes about trying to outperform.

To be clear, what I'm about to present is merely one man's opinion on the subject. It is worth noting that every active manager in the game attempts to provide outperformance with their methodology. As such, there are any number of ways to try and skin the outperformance cat. But what follows is my take.

First and foremost, it is important to understand that I'm a risk manager - I always have been, I always will be. And cutting to the chase, to me, this is where outperformance and long-term investing success is born.

I agree that "markets work." I also "get" that investors need to "stay in their seats" and ride out the vast majority of volatility events in the markets. However, I firmly believe that investors would prefer not to see their portfolios lose 30%, 40%, or 50% the next time a really big, really bad bear market hits.

Go ahead, do your own survey. Go out and ask 10 investors the following question: If you had a choice, would you choose to stay fully invested in stocks during ...

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Building Modern Portfolios - Three Ways To Generate Alpha

In case you missed the first two segments of this series, the topic at hand is how to go about developing portfolios designed to outperform in today's modern markets. More specifically, how does a manager attempt to provide outperformance in ...

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Looking For The Reason

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Game On

Good Monday morning and welcome back. First things first. If you haven't seen the new SowellManagement.com website, be sure to check it out. Kudos to Don Moenning for knocking this project out!

Turning to the markets, tensions with North ...

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While I Hate To Sound Like a Broken Record...

Good Monday morning and welcome back. While the bears contend that the market is ripe for a spill, so far at least, sideways appears to be the new down. For example, the S&P 500 has been moving sideways since mid-February ...

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Markets Don't Like Surprises

My plan for this fine Thursday morning was to continue our discussion of how my team goes about building portfolios for financial advisors and their clients that incorporate a modern approach to diversification and risk management. I.E. How to design ...

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How Do You Outperform?

A financial advisor recently asked me a question that, on the surface, sounded simple enough. In fact, I thought my answer was going to be a breeze and that since I had set aside an hour for the call, I'd ...

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A More Cautious Stance Makes Sense

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Is The New Narrative All About Confidence?

Those expecting to see the stock market indices crumble in response to the GOP's failure to get their healthcare bill passed are probably disappointed with the action seen over the last two days. Remember, just about everybody in the game ...

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Prior to last week, the market narrative was based on hope. Hope that corporate tax cuts would bring cash and jobs back home and make America great again. Hope that tax reform would help the middle class. Hope that reducing ...

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All About "Strategery"

At this time yesterday morning, the thinking in the market was that if the GOP Healthcare bill was passed Thursday night, traders could breathe a sigh of relief and look ahead to the more important stuff - aka Tax Reform ...

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