Flexible Balanced Account Strategy

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The objective of the Flexible Balanced account is to generate a very acceptable after-tax return over full market cycles and preserve capital using a blend of equities and fixed income. We strategically adjust the allocation in our portfolios based on our assessment of our overall market and macro-economic view and the potential of and for individual securities. To increase the likelihood of achieving this goal we suggest that investors assume at least a three year holding period to:

  • Benefit from tax-deferred compounding and the lower long term capital gains rate.
  • Increase the probability of generating a positive absolute return, and
  • Reduce the likelihood of loss in the aggregate portfolio.

We employ a risk-averse strategy predicated on the belief that strong long term investment results are the result of compounding of reasonable gains and the avoidance of significant losses in market downturns. We make a conscious effort to limit downside exposure as much as to generate upside returns.

We first strategically adjust the asset allocation of the portfolio based on our assessment of the current macroeconomic and market cycles. Within this context we then seek to enhance the return by selecting what we believe are the most attractive individual investment opportunities.

The two (equity) bear markets in the past decade highlight the importance of a disciplined asset allocation strategy. We believe the capital destruction caused by the most recent bear markets argues for a flexible risk-adverse approach to portfolio management. A portfolio structure that combines the growth attributes of equities, holds some cash for opportunistic situations and utilizes the income and capital preservation attributes of fixed income can be a prudent and appropriate long-term investment solution for many.

Over the long haul, we believe a dynamic and flexible balanced approach that strategically structures a portfolio and allocates assets to equities more heavily in cyclical bull markets and more heavily to bonds in bear markets, may enhance overall returns and provide more capital protection.

Assuming a static 50% equities 50% fixed income allocation as a starting point, no more than 65% will be allocated to either fixed Income or equities at any time. Conversely the minimum allocation to any asset class is 20%.