Investment Management is a two-step process. The first step is to construct a profile for each client. This profile discovers each client’s tolerance for risk, goals, and time horizon. The next step identifies the appropriate investment style that matches the client profile. The investment style could be income only or progress all the way to aggressive growth.

Building and managing investment portfolios is not an easy passive undertaking. I believe it requires three important ingredients:

          1. You must have a well-defined universe that incorporates broad independent markets into portfolios.

          2. You must have a well-defined process for identifying potential opportunities.

          3. You must have a well-defined system of managing risk.

As you can see, building and managing investment portfolios is not a simple, passive task. Instead, it is a very active process that must evolve with the markets and changing economic conditions around the world.

At Anchor Wealth Management, we have studied the various financial markets. In some cases, we have gone back over 200 years. As it is commonly known, we study the past because it is prone to repeat itself. We believe this to be true. Our clients appreciate that type of thoroughness and understanding of the markets because their money is important to them.

In addition to a fundamental understanding of what is occurring on all the continents (with the exception of Antarctica) we use third party research that helps quantify supply and demand in the markets which helps in gauging risk. Additionally, we are watching for shifts in relative strength to see where new market leadership emerges. Tie that in with having a “risk budget” each portfolio and we have a complete portfolio management process.

Constructing the portfolio is just the beginning, there is the ongoing monitoring of the portfolio and client discussions to make sure, over time, the portfolio is doing what each client wants. For example, as a client gets closer to retirement, we may reduce the risk in the portfolio and begin to shift the portfolio towards more conservative and income oriented investments.  

(All investing involves risk including loss of principle.  No strategy assures success or protects against loss.  Past performance is no guarantee of future results.)

Like runners in a race, the winners are typically those who possess stronger elements (speed, strength, and endurance). We believe investing is much the same way. In our proprietary piece “What’s Happening...” find out what we feel are the areas of the market that possess superior elements of strength.

At AWM, hundreds of markets around the world are consistently being monitored. These include global stock indexes and global bonds. These areas are being monitored to determine where opportunities may exist.

Individual positions are selected for each of the investment programs by identifying the strongest areas in the world based on price. Once these areas of strength are identified they are evaluated for their fundamental strength. This helps build strong portfolios and helps to avoid areas of weakness.

In the economic world around us, there are areas of strength and areas of weakness. Like we see in our lives, some areas perform better than the average and some areas perform worse than the average. That is life. This also applies in the financial markets as well. There are many opinions about the financial world, but in the end, people really vote with their money. As they vote, we see trends begin to emerge. Trends that go down, trends that go sideways and trends that go up.

As time goes on, areas that were weak become strong and potentially become new investments, and areas that were strong become weak and should be removed from investment portfolios.

It is essential to watch for these “Money Shifts,” because when these shifts occur, they can be in place for many years and you do not want to miss them.

The cornerstone to building wealth is to have a system of risk management integrated into the process of portfolio management. At Anchor Wealth Management, risk is managed (never eliminated) by having the following in place:

1. “Supply and demand” indicators are used that help determine whether we are on offense or defense.
2. Every position added to the portfolios has a downside exit strategy in place before it is added.
3. Risk is continuously monitored by moving exits up, as positions rise in value. This aims to manage risk in each position and seeks to helps protect profits.
4. There is a maximum allowance for each segment of the market that I participate. This helps with diversification.
5. Each portfolio has a quantified “risk budget” in place.