Trends drive market values. While the financial markets never repeat and past performance is not indicative for future returns, markets are not random. Although vulnerable to current events, asset classes tend to follow discernable trends, both long and short term.
Broad market trends can last several months, if not years. Fund performance also has been proven to exhibit persistence, particularly over the short to intermediate term. Top performing funds tend to stay in the lead while the investment style they are pursuing remains in favor. Wall & Co. Global Capital Management strategies are designed to capitalize on performance persistence over relatively short-term periods.
These strategies use a combination of momentum analysis -- which assists in targeting funds exhibiting performance persistence -- and tactical analysis of market conditions to determine the level of risk present in the market and how aggressive an investment position should be or if it is time to hedge.
Implementation
Tactical Portfolio management at Wall & Co. begins by sorting the universe of equity and bond mutual funds and ETFs to identify those that meet our primary criteria. Targeted funds must charge no sales load and have no, or very limited, short-term trading penalty restrictions. We then rank this universe according to Wall & Co.'s proprietary momentum-based weighting model that analyzes 12, 6, 3 and 1-month performance time frames to identify the top 20 buy candidates. Based on our overall market trend analysis, we will buy 10 to 15 of these top ranked funds.
Portfolios are upgraded regularly based on the performance of the underlying investments, changes in the ranking of buy candidates, and market trend. This process steers the portfolio incrementally to areas of the market demonstrating strength. Wall & Co. intermediate-term programs will trade in and out of the market between 10 to 12 times a year. In our shorter-term programs, we will trade in and out of the market more than 80+ times in a year. Technical analysis drives all decisions.
When market trends head downward, we move 100% out of equity portfolios into "cash" as a hedge position to limit risk during uncertain market conditions. Although some managers use short-selling as a way to hedge, the market's historically upward bias makes it difficult for "short" strategy managers to consistently and profitably hedge portfolios through short selling.
Although most of Wall & Co.'s managed programs do not use leverage, we do offer more aggressive investors the option of using leverage on our flagship Global Growth (WGOII) program.