Every decision made by Portfolio Strategies is influenced by our belief in the necessity of risk management. This means, in essence, that while we seek to consistently provide the best returns possible, our primary concern is in preserving our clients’ principal.
Risk management is about balancing the objectives of preservation and growth. It is a course that requires discipline and focus.
Many investment managers believe that risk and return are directly related, and that an investor must be willing to take above-average risks to achieve above-average market returns. It is our belief, however, that the best way to increase return is to minimize losses.
The key is having a professional management team which is actively engaged with the market every day and making the right decisions accordingly.
While rising markets can be exhilarating, it is important to remember that nothing lasts forever. And that which jumps quickly can fall back just as fast. Conversely, that which seems to be in a free fall can suddenly change direction and begin ascending with rocket-like velocity.
It is how well an investment does in both types of markets that must be compared side-by-side in order to accurately assess its value. This comparison is where we believe you will see the real difference in our approach to money management. Thus, we ask you to look at not just what portion of the rise we may capture with our money management, but more significantly, what portion of the fall we may protect you from.
It is our position that safeguarding against losses has a bigger impact over time than just capturing gains.
Now, it might seem that our risk management principle is so simple and logical that everyone would want to use it. Surprisingly, this is not the case. Many investors instead rely on the “buy-and-hold” approach. As its name suggests, the buy-and-hold method requires that investors make an investment and hold on to it regardless of how it performs. This approach is built around the theory that the market will naturally move through recurring cycles of gains and losses and that, over time, the gains will outnumber the losses.
While this theory has some validity, no one can turn back the clock to the moment before a hard-won gain was lost. For many investors, the time required to sit through an extended down cycle followed by the time required to rebuild from a major loss is neither an appealing prospect nor a practical possibility.
By choosing Portfolio Strategies, however, you choose to manage risk and keep that time on your side.