Investing requires time and discipline to deliver rewards. That's why at Path Financial we focus on medium- and long-term goals. .
What makes our approach truly unique is the use of quantitative techniques for finding, on an ongoing basis, the mix of assets that we believe truly maximizes portfolio returns and reduces risk.
Most investors are usually advised to choose a static mix of fixed-income and equity assets. This approach locks in a mix that is rarely optimal. Worse still, this can cause an investor to hold an underperforming asset class for a long period of time.
Typical investment advise rarely treats cash as an asset class; in constrast, our process incorporates cash whenever it is necessary to limit capital losses in turbulent market periods.
A combination of strong returns and controlled risk is essential for the success of any portfolio, and our approach can contribute to the success of your investment goals over the long run. Our philosophy is based on four steps: Asset Selection, Asset Allocation, Loss Limitation and Model Testing.
Asset Selection
We carefully select assets that contribute to overall portfolio diversification. In practice this means that we measure the correlation among instruments and choose those which tend to move most independently from others over various market conditions.
Asset Allocation
The critical component of our strategy is the allocation process. We rebalance portfolios quarterly based on techniques from Modern Portfolio Theory, which concludes that there is a specific mix that maximizes portfolio returns for a desired level of risk.
Loss Limitation
All models have limitations when dealing with unpredictable markets. Therefore we have established clear guidelines to limit risk. During turbulent periods we increase our clients' allocation to cash when specific conditions are met to help control losses.
Model Testing
The clarity of our investment process allows us to back-test the performance of our portfolio over different market periods. This shows that our allocation process could have yielded higher returns than the market on one-, five- and ten-year periods, while lowering volatility and limiting losses.
Did you know?
- According to Bloomberg, the average mutual fund underperformed its benchmark in the last 5 years.
- Many mutual funds charge a sales fee that can be as high as 5.75% on top of the ongoing management fee.