Our investing mission:
You’ve been through the trauma of 2008. You never want to go through that again. Helping you avoid the adverse effects of such a market meltdown is at the top of our list of priorities.
In fact, we’re so dedicated to protecting capital while still capturing upside that we build our relationships on two core elements: risk management and teaching you how to be a disciplined investor.
PROACTIVE RISK MANAGEMENT
We’ve designed our hands-on portfolio restructuring process to prioritize the protection of your nest egg. We accomplish this in three specific ways:
1 – We run your money like we run our own private assets, literally. The tools, techniques and advice we offer you flow directly from the actions we take in our own personal portfolios.
2 – We use proprietary algorithms. With our time, expertise and long technological development process we’ve designed algorithms to help mitigate two kinds of risk: 1) overnight and 2) intra-day.
3 – We employ loose stop losses. Knowing the exact amount of risk allows for fluctuation of equities while ensuring that investments are risk-controlled.
DISCIPLINED INVESTING TOOLS
Our relationships with clients are about more than just buy and sell advice. We also place value on teaching investors how to behave in the new financial environment, including:
1 – The basics of market understanding. Today’s investing landscape looks unfamiliar by the standards of previous decades. We want you to comprehend what has changed, the implications of those changes, plus how they impact your portfolio and future investment decisions.
2 – Advanced risk management techniques. In today’s world (where low interest rates don’t keep up with real inflation) if you want your assets to grow you’re forced to invest.
3 – Reduction of emotion. Every investment carries risk. This is where fear comes in. Every investment supports a dream, too. This is where greed can enter in. How do you protect your assets while taking the necessary risk and modulating the desire for ever greater reward? We teach how to approach investing from an emotional perspective grounded in education, information and empowerment.
Successful stock market investing requires more technology and less emotion.
Fear and greed have always been the enemies of sound investment decisions. Today, they are even more so. In a market dominated by machines that have zero emotions the individual investor needs to find a way to master his own. Algorithms reduce both the interference of emotion and can dramatically contain investment risk.
Institutions have long since discovered that by using technology they can develop a new kind of “inside information.” Traditionally, what was only available to deep-pocketed institutions was not available to the individual investor. Technology, however, has changed all of that.
Algorithms are the new “inside information.”
This is the age of the machines. Computer algorithms now dominate the entire investing landscape. According to the latest research from Greenwich Associates, “… electronic trades make up about 55 percent of U.S. equity trading volume….” Other sources suggest the number of algorithm-driven trades is even higher at 84%.
Developing an investment portfolio driven by fundamental analysis (the preferred and most successful way for decades) has never been more challenging. The reason for such difficulty can be described in one word: volatility.
Predator computer algorithms are designed to drive human emotion and execute at speeds far beyond human capability. They are designed to profit by producing investor fear or greed and taking the opposite side of the transaction.
Can one fundamentally invest in a company with a 5-year time horizon and succeed?
Of course, but the volatility one must endure during that 5-year stretch has increased exponentially and the wide price swings make it difficult for the human to stay the course.
Proprietary computer technology is a must.
Four times in the last two years the S&P 500 dropped an average of 10% in just seven weeks. Do you remember your portfolio during those swift declines?
Our investing mission is to employ proprietary computer technology, painstakingly evolved over the last 5 years, and vigorously tested over the last 10 years, to aid the human brain by dramatically reducing volatility.
Our platform’s core function: To dramatically reduce the drawdowns experienced in the “buy and hope” portfolio while still capturing the upside.
Capital preservation and growth are key.
Whenever capital is deployed risk is taken. In a strategy where Stop Loss rules are followed one can safely say the risks are always going to be relatively equal. The key then is to patiently determine when reward possibilities are at their highest and expose capital only at those optimal times.
If executed with discipline we believe this optimal-time-exposure process will result in an equity curve that stair-steps higher at a 45-degree angle. This means our capital will be growing at a steady clip while dramatically reducing the draw-downs, thus creating an investment experience much more comfortable than the wild volatility of the world we live in today.
We have designed a professional Algorithm Platform and an investing process for individuals (see below) to smooth out the investment experience and combat the institutional machines that are predators in the stock market.
Process — Swing Algorithm
(intermediate investing term)
Focus on three indices.
We will be employing our computer algorithm technology on the three (3) most important and encompassing indices:
- S&P500 (SPY)
- NASD100 (QQQ)
- Russell SmallCap600 (IWM)
- US 20+ Year Treasuries (TLT)
The resulting data will be our compass and will determine direction and exposure for the rest of the portfolio.
Seventy-five percent (75%) of Sectors, Groups and Stocks follow the direction of the major averages so these indices will always be our North Star.
Once we patiently sync portfolio with index direction we can begin to build our 45-degree equity curve. The challenge will be having the patience to remain liquid until the appropriate time arrives. Synchronizing with patience will always be the key to correct execution.
Process — Daily Hedging Algorithm Technique
Reduce volatility and avoid drawdowns.
We have developed important intra-day hedging for the express purpose of further reducing volatility and capital drawdowns.
Our Swing strategies execute at precise times of day based on extensive research. So, we must employ intra-day hedging techniques to buffer volatility until the Swing strategy signals a change in direction.
The key to this process is allowing for typical volatility during the day but recognizing that when volatility violates our program limits, protection of capital is required. We have optimized this recognition process for the specific volatility profile of each of the three (3) major indices and our proprietary selection of sectors and groups.
Summarized statistics over a 10-year backtest
A CLOSE STUDY OF THE SPY ALGORITHM OVER A 10-YEAR PERIOD REVEALS THE FOLLOWING IMPORTANT DATA
RETURN OF INVESTMENT
65% success rate over 10 years (includes financial crisis of 2008)
71% success rate over 8 years (excludes financial crisis of 2008) — This means 3 out of 4 entry signals result in profitable outcomes.
Return on Initial Capital = 164.41%
Buy & Hold Return = 93.00%
Annual Rate of Return = 9.71%
Profit Factor (Gross Profit vs. Gross Loss) = 2.99
During the 2008 bear market
Max drawdown = –23.58%
Buy and hold max drawdown = –57.40%
8 years excluding 2008 bear market
Max drawdown = –5.18%
Buy and hold max drawdown = –21.7%
RINA Index = 440.80
RINA Index = Net Profit / (Average drawdown * percentage of time in market)
The RINA Index rewards strategies that spend less time in the market, decreasing the inherent market risk.
Target ratio = >100. Ideal ratio = >200.
% Time in the Market: 48.52%
Longest flat period: 63 days, 30 min.
Find out how the RCM Index Swing Strategy Platform can reduce downside risks in your portfolio.
Dramatically reduce the downside risks associated with the traditional "buy and hope" investing approach.
Find out how Rosenthal Capital Management can help rehabilitate your portfolio.
SPEAK TO ONE OF OUR ALGORITHM ARCHITECTS...