Our investment philosophy is governed by four simple, steadfast rules. By implementing such tactics, we can gain an advantage over traditional strategies by applying the Law of Parabolic Proportions in our favor.
Rule #1: Don't Lose Money
Warren Buffett's #1 Rule...Don't lose money. Indeed, this is a little harder in practice than in principle. We believe losses are inevitable and thus must be controlled. We do not share in the belief of so many financial advisors who contend, "it always comes back". Rather, we subscribe to the Law of Parabolic Proportions which says the smaller the loss, the quicker the recovery. By controlling losses, we know we will protect our client's capital for future opportunities.
We use stop-loss orders on every single position in our portfolio specifically to limit downside risk. In addition, we seek to be properly diversified at all times so that if the stock market corrects, some securities should still appreciate. We continuously conduct various correlation studies to make sure we maintain non-correlated securities in our model.
Rule #2: Buy Low, Sell High
Yes, you are familiar with this one. Everyone is familiar with this one. But who actually does it? The answer is we do. And we do it often. Amazingly, many financial professionals preach the "miracle of compound returns" yet do not actively seek opportunities to capitalize on the power of compounding.
Our MAP system consistently identifies stocks that are "on-sale" to the tune of 150 - 200 times per year. This provides us with two key advantages. First, buying low provides us with a low-risk stop-loss price for a readily available exit. Second, it allows for accelerated compounding by buying stocks near inflection points so when they do move in our favor, our percentage gains are greater.
Rule #3: Sell High...
It sounds redundant and it is. But it is redundant for a purpose. As Mark Cuban says, "The only way to keep the money you make is to CASH OUT." We consistently close out profitable positions and then reinvest our client's proceeds into stocks that are "on-sale" or priced low. The result is we are able to compound the miracle of compounding.
Selling high is just as, or perhaps more, difficult than buying low. Too often investors "fall in love" with a position. We seek to take an entirely objective approach towards all transactions we engage in for our clients. We use a complex algorithm to identify profitable exit points. By selling high, we get to lock in profits which we can then apply to new trades when they are presented.
Rule #4: "When there is a pile of money sitting in the corner, go pick it up."
Jim Rogers has famously said this rule has governed his approach to investing for his entire investing career. As one of the world's greatest investment minds, we think it is a good idea to follow his lead. Not often, but often enough to matter, Mr. Market leaves a pile of money just sitting in the corner to be picked up. Markets can be so irrational at times, the objective investor can reap huge rewards by being patient and nimble. We don't always find these opportunities but when we do, we invest in them for ourselves and our clients.
And this brings up a key idea in that, too often, financial firms and their brokers save the best ideas for themselves. They feed themselves the good stuff and give their clients the scraps. However, we have a fiduciary duty to our clients which includes prohibitions against free-riding, front-running or using our client accounts in any way to gain an advantage in a firm-owned account. In poker, they say "if you don't know who the sucker is at the table, it's probably you." We think the same goes for Wall Street. If you don't fully understand how the boys in New York can confiscate your wealth, well guess what? We recommend reading our page "How Wall Street Leverages Your Money to Make Their Money". 100% of our money is invested alongside our clients, traded in block trades or according to strict rules preventing us from gaining an advantage from you.