Most investors and advisors focus on what specific investments to be in, rather than looking at the big picture, while spending little time focusing on asset and currency allocation.
The Reality is that, at least 85-90% of an overall portfolio return is solely due to an asset allocation decisions. In Canada, currency allocation is also very important factor that is often forgotten, since many investors have portions of their portfolio in US and other global investments. Fortrus recognizes the importance of allocation strategies and uses it as the foundation for its investing platforms.
If investors simplify their strategies, and focus most of their efforts on asset allocation, the odds are they would be miles ahead of the average investor whose focus is on individual investment picks. With the help of Fortrus our clients can utilize our market strategies best decide what sectors of the market are the best to invest your money in, rather than trying to sort through all the noise of the markets to find find the next ONE big thing.
The importance of asset allocation is one of the main reasons that factor into Fortrus’ position that buy & hold strategies will absolutely fail within the current global economic climate. Two major examples of the importance of asset allocation have been seen since the beginning of the 21st century. In 2000 the bursting of the tech bubble saw markets crash up to 50% with the technology sector falling a staggering 70%. During this period most investors, brokers, and advisors were position in, and heavily encouraging investment in the tech sector, as it had created vast amounts of wealth in the years before. It is important to remember that if you lose 50% on an investment you have to gain 100% once again to break even, it took several years for markets to recover back to levels in 2000, before again crashing in 2008. More recent examples can be seen over the last few years since the financial crisis of 2008. Since the crisis there has been significant volatility, with markets rising and falling sharply, making it very difficult for the average investor to withstand the pressure. For example Markets peaked in April 2011, bottomed in October 2011 and then rallied until May 2012.
The Fortrus model was able to foresee all these moves within the market, and allowed us to properly adjust our investments to get the highest profit potential. In these 3 moves since 2011, our portfolio saw gains of more than 20% for the year versus the overall market losing 17%. This is a significant difference over just a 1 year period. In a secular bear market with sharp periods of volatility, in an overall downward trending market, asset allocation, and market timing are the only way to profit, while those who use long term buy and hold strategies are doomed to fail.
Become a Fortrus member today, and you can receive all the news tips, information and portfolios that can help you PROFIT rather than loose money in this difficult investment climate.
The problem with the system as advisors and banks are not paid to advise you to move your assets from one asset class to another. It is easier and more profitable to leave a fixed portfolio as fees will be maximized and the amount of work minimized. Professional advisors such as hedge funds may provide more effective strategies focusing on asset classes and momentum securities. These investments tend to be restricted for high net worth advisors. Even there, one must be careful as each manager has their mandate on how to manage their portfolio that they must adhere to. At times certain strategies will work, and at other times they will not.
Let’s have a look at the asset allocation investment options:
Asset Classes = Cash, Fixed Income or Equity Investments
Cash provides the lowest return but is the safest investment. Fixed income is the next safest with slightly higher returns. And equity investing provides the potential greatest return potential but also is the highest risk. What is important to note is that an investor can make money when investments go up or when they go down. This can provide a significant edge to your investing but the key is ensuring that you have a process when to move in and out of asset classes.
Currency allocation is the process of having investments that are held in different currencies. Going beyond the Canadian dollar can be extremely profitable if done strategically. Currencies that should not be ignored are the US dollar, Swiss Franc, Australian dollar, Chinese Yuan, Euro, Singapore dollar, and Swedish Krona. There are numerous other currencies but this group of currencies provides a nice overview of different regions of the world with varying characteristics. At times the US dollar will be viewed as the safe haven currency and provide the most upside. At other times, it would be prudent to have exposure to Far East currencies such as the Chinese Yuan or Singapore dollar. When commodities are strong, look to ensure that you’re Canadian and/or Australian dollar exposure is maximized. In the end, managing currencies is another component that should not be ignored.
We saw many investors think they were doing great in US stocks from 2003 to 2007 but they did not account for the depreciation of the US dollar relative to the Canadian dollar. You had to make about 50% on your investments just too breakeven as the US dollar devalued to the Canadian dollar by that amount. This is a perfect example of how you must be aware and manage currencies just as you would manage your asset allocation and specific securities.
Fortrus has a great program called the Fortrus Asset and Currency Allocation Service. It`s goal is to let investors know which of the three asset classes to be in and by how much. It also advises if we recommend shorting an asset class as well as which currencies we prefer.
Overall manage your asset and currency allocation; purchase the right securities and have a process for to ensure you are doing it correctly. Our Fortrus Coaching Program teaches investors how to do this as well as lets you know what we are doing. Get away from focusing on specific ideas and securities and focus first on asset and currency class. Then the securities will nicely fit into the strategy.
The Fortrus Asset and Currency Allocation Service is a premium product. Upgrade your account today