With Halloween right around the corner, we’re going to get financially spooky. What scares you the most financially? From the conversations I have had with both financial advisors and individual investors, here are the top concerns that I hear:
- How would my portfolio handle another 2008?
- How long can this bull market go? Is it time to reduce my equity exposure?
- Will I have enough money in retirement?
While the imaginary ghosts and goblins of Halloween are all in good fun and contribute to the celebration, the very real fears of the financial markets are based on experience. This generation of investors is never going to forget the pain (financial and emotional) that they suffered in the last two major bear markets. Those experiences will inform their investment decisions for the rest of their lives. Does that mean that they will always choose the most conservative (and potentially the lowest-returning) investments? No, but I do think that risk management will be top on their priority list for a very long time.
That creates an enormous opportunity for the financial advisor who is capable of building a well-designed asset allocation that places a priority on risk management. Advisors who employ Dorsey Wright research have a number of tools to help them with that task, including D.A.L.I. (Dynamic Asset Level Investing). For those advisors looking for a turn-key Tactical Asset Allocation solution, our Global Macro strategy is a good option. This continues to be the Dorsey Wright strategy with the most assets under management and which continues to generate the most interest. A brief primer of the strategy is given below:
The Dorsey Wright Systematic RS Global Macro strategy provides broad diversification across markets, sectors, styles, long and inverse domestic and international equities, fixed income, currencies, and commodities using Exchange Traded Fund (ETF) instruments.The strategy holds approximately ten ETFs that demonstrate, in our opinion, favorable relative strength characteristics. This strategy is uniquely positioned from an investment opportunity perspective because it is not limited to a specific market. This allows for the efficient allocation of money globally to opportunities where we believe potential returns are particularly compelling.
The exposure to different asset classes in Global Macro is designed to be flexible, as shown in the following diagram:
A sample aggressive allocation of the strategy might be as follows:
While a sample conservative allocation of the strategy might be as follows:
There are many more potential allocations of the Global Macro strategy than are shown in those two samples, but it should give you an idea of how the portfolio has the flexibility to adapt to different environments.
This same Global Macro strategy can be accessed in a number of different ways:
- Separately Managed Account: Global Macro is available on over 20 different platforms
- Unified Managed Account: This strategy is available on the Wells Fargo Masters and DMA platforms
- Mutual Fund: Since August 2009, this strategy has been the underlying model used to manage The Arrow DWA Tactical Fund(DWTFX)
- Exchange Traded Fund: Investors can also now access the Arrow DWA Tactical strategy in an ETF (DWAT)
Being able to provide guidance to fearful investors is a key element of being a successful financial advisor. With Dorsey Wright research and managed portfolios, like Global Macro, advisors can be well-prepared to offer solutions to their clients. Investors want flexibility, risk management, and diversification. They want to make money, but they want to do it in a prudent way. This strategy is designed to be that solution.
For questions about this portfolio, please e-mail [email protected] or call 626-535-0630.
The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. These examples are presented for illustrative purposes only and do not represent a past recommendation.
