How To Outperform - It Starts With...

With the stock market waiting on both earnings and the economy to improve in order to justify current valuation levels, it would appear that traders are basically trying to decide which way to go from here. (IMO, a meaningful break below 2320 would embolden the bears while a move above 2400 would reinvigorate the bulls.) As such, this appears to be as good a time as any to continue our discussion on portfolio design.

So far, we've talked about establishing goals, selecting time frames, and identifying the correct benchmarks. We've reviewed my take on the three ways to generate alpha (timing, selection, and leverage). Now it's time to get to question of how one goes about trying to outperform.

To be clear, what I'm about to present is merely one man's opinion on the subject. It is worth noting that every active manager in the game attempts to provide outperformance with their methodology. As such, there are any number of ways to try and skin the outperformance cat. But what follows is my take.

First and foremost, it is important to understand that I'm a risk manager - I always have been, I always will be. And cutting to the chase, to me, this is where outperformance and long-term investing success is born.

I agree that "markets work." I also "get" that investors need to "stay in their seats" and ride out the vast majority of volatility events in the markets. However, I firmly believe that investors would prefer not to see their portfolios lose 30%, 40%, or 50% the next time a really big, really bad bear market hits.

Go ahead, do your own survey. Go out and ask 10 investors the following question: If you had a choice, would you choose to stay ...

Read More
Comments

Building Modern Portfolios - Three Ways To Generate Alpha

In case you missed the first two segments of this series, the topic at hand is how to go about developing portfolios designed to outperform in today's modern markets. More specifically, how does a manager attempt to provide outperformance ...

Read More
Comments

Looking For The Reason

Long time readers know that when markets do something unexpected - such as breaking a 3-day losing streak with a surge of 184 Dow points - I need to know why. And while I haven't forgotten that I'm in the ...

Read More
Comments

The Daily Decision for 4.17.17


The Early Take on the Market:
Tensions with North Korea and better-than expected economic data out of China are in focus this morning. The Dow, S&P 500 and Nasdaq indices are coming off three straight losing sessions and start the ...

Read More
Comments

Game On

Good Monday morning and welcome back. First things first. If you haven't seen the new SowellManagement.com website, be sure to check it out. Kudos to Don Moenning for knocking this project out!

Turning to the markets, tensions with ...

Read More
Comments

The Daily Decision for 4.10.17 - Caution Remains Warranted

Publishing Note: I am traveling the rest of the week and have very early commitments Tuesday/Wednesday mornings (the meetings start at 7:00am central - who's idea was that!). Thus I will publish Daily Updates as my schedule permits ...

Read More
Comments

While I Hate To Sound Like a Broken Record...

Good Monday morning and welcome back. While the bears contend that the market is ripe for a spill, so far at least, sideways appears to be the new down. For example, the S&P 500 has been moving sideways since mid-February ...

Read More
Comments

The Daily Decision for 4.7.17 - Missiles and a Big Miss


The Early Take on the Market:
Missiles and a big miss on the data front are in focus on this Friday morning - but so far at least stock futures are none the worse for wear. By now, I am sure ...

Read More
Comments

Markets Don't Like Surprises

My plan for this fine Thursday morning was to continue our discussion of how my team goes about building portfolios for financial advisors and their clients that incorporate a modern approach to diversification and risk management. I.E. How to ...

Read More
Comments

The Daily Decision for 4.4.17 - New Leadership, But Staying Cautious


The Early Take on the Market:
The economy and earnings expectations are in focus this morning as traders continue to fret about yesterday's weak(ish) auto sales and the ISM data that came in below expectations. Our guess is ...

Read More
Comments

How Do You Outperform?

A financial advisor recently asked me a question that, on the surface, sounded simple enough. In fact, I thought my answer was going to be a breeze and that since I had set aside an hour for the call, I ...

Read More
Comments

The Daily Decision for 4.3.17 - Staying Cautious With Outperforming Positions


The Early Take on the Market:
Happy Monday and welcome back. There are several news items crossing the wires this morning, but nothing that is likely to capture traders' attention to any great degree. And with the quarterly earnings parade ...

Read More
Comments