For years many people have used a buy and hold approach to investing. However, why be stuck in underperforming sectors of the market or be in the market at all during high-risk periods with all of your assets. A tactical investment strategy aims to invest in market leadership during low-risk periods and preserve capital in high-risk periods.
Tactical Investment Strategy
What isTactical Investing?
Many people think of tactical investing as simply shifting their assets between various sectors of the market. However, at Churchill Management Group we define tactical as varying the percentage invested in the market depending upon prevailing risks. When risks appear high, a portion or all of the portfolio may be invested in cash or cash equivalents. When risks in the stock market appear low, we may increase exposure to equities, attempting to take advantage of growth opportunities.
Why Use a Tactical Approach?
The impact of a Bear Market can be devastating to a portfolio due to the power of compounding. As your losses grow the return needed to break even compounds at an even faster rate. If you were invested in the S&P 500 during the Financial Crisis Bear Market, you would have suffered losses of over 50%, requiring a 100% return to just break even! A tactical approach aims to protect you from these losses using capital preservation.
However, when risks are low, a tactical portfolio aims to be invested in equities for significant price appreciation. The long-term goal is to achieve your objectives while providing a level of comfort during both high and low market risk periods.
Whether you decide to go at it alone or use a money management professional, a tactical investment approach can be a powerful and useful tool for those looking to grow their portfolio without being at the mercy of volatile markets.
By largely avoiding the bear markets of 2000-2002 and 2008, Churchill Management Group’s Premier Wealth Tactical Core strategy was able to outperform the market all while taking on less risk*. However, at the end of the day, it is less about beating the market, but knowing that your assets are safe and protected for when you need them.
Implementing a Tactical Approach
The first step is to ask yourself, “Should I be invested?” At Churchill, we use technical, fundamental, and sentiment indicators to guide us in answering this question. On a daily basis, our research team evaluates the indicators to determine risk vs. reward within the market.
By weighing risk vs. reward, we seek to avoid the high-risk bear market periods like 2000-2002, 2008, and the recent 2020 sell-off while growing capital during the low-risk periods like 2003, 2009, 2013, and 2017.
Once you have determined the percentage of the account to be invested, the second question is “What should I be invested in?” At Churchill, we use technical and fundamental research to make this decision. We use technical indicators such as moving-day averages and liquidity to help us identify trading opportunities.
Fundamental analysis helps tell you what to buy and technical analysis helps tell you when to buy. When looking at fundamentals we will examine the health of the investment, including such things as price-earnings ratio, earnings per share, return on equity, etc. This helps us determine what companies we think have the most growth potential.
Learn more about Churchill’s Premier Wealth Tactical Core Investment Strategy or speak with an advisor today to see how this strategy may fit into your portfolio and to learn more about our other wealth management services.
*Past performance is not indicative of future results.