“Primum non nocere”

That’s a Latin phrase that means "First, do no harm." It is a central philosophy of physicians. It is also our investment philosophy at Valley National Financial Advisors.

Yes, we invest your money with an eye toward growth. But at the same time, we take great pains that our investment decisions on your behalf protect you from loss.

In reality, securing gain and protecting against loss are two sides of the same coin. Consider that a portfolio that loses 50 percent needs to grow 100 percent just to get back to where it was. Many investors who lost 50 percent or more of their portfolios in the agonizing bear market of 2000 – 2003 are still patiently waiting to recoup.

Diversification is one time-honored strategy for protecting against market downturns. By not putting all your eggs in one basket, but rather, owning different kinds of securities, such as stocks, both U.S. and foreign, large-company and small-company, as well as bonds and natural resources, you can somewhat shield yourself from the winds of an economic storm.

But diversification in the last several years hasn’t always worked as well as it has in the past. Globalization has led to greater correlation among markets. When the U.S. stock market falls, other markets often fall in synch. Something else is needed.

After years of study, testing, and practical application, Valley National has found a way to augment the power of diversification and attempt to capitalize on market trends to both reduce your investment risk and boost your long-term potential gain. Our uniquely successful strategy is called tactical asset allocation.

The strategy uses mutual funds and exchange-traded funds, which are baskets of securities that trade on the markets throughout the day. Some of the mutual funds and exchange-traded funds do well when the stock market rises (a “bull” market).  Some do well when the stock market declines (a “bear” market).

By beefing up on the bull market investments in a rising, bull market and switching the emphasis to the other investments in a declining, bear market, we attempt to achieve not only instant diversification among various different kinds of assets, but we can also buy or sell at opportune moments to attempt to take full advantage of market momentum.
In the long-run, market prices tend to reflect the profitability of the economy. In the short-run, however, market prices tend to rise and fall based on the investor confidence.  Studies show that upswings in market prices tend to continue for certain periods of time, as do downswings.

In very simple terms, we do not buy and hold mutual funds and exchange traded funds – instead, we make moves in the portfolio to react to the stock market trends.  By doing so consistently, we attempt to capture excess market gains, while greatly limiting the losses.

Over the past 10 years, including four dark years in which the U.S. stock market tumbled, our balanced tactical asset allocation model has not seen a single down year with a loss greater than 3%. From 1997 through 2007, the model earned an annual rate of return of 10.37 percent, versus 5.91 percent for the S & P 500 (an unmanaged index of large U.S. stocks) – with significantly less volatility.

We’ve also added a second, more aggressive dynamic asset allocation model, which during the back-tested seven-year period 2001 – 2007 earned an annual rate of return of 11.43% versus the S & P 500’s 3.30% percent.

Mind you, neither tactical asset allocation model is certain to outperform the S&P 500 at all times. When the stocks are soaring, either model can well lag. But it is our firm belief that over the course of years to come, both our balanced model, and our, more aggressive model will continue to outpace the market, while greatly limiting your downside risk.

DISCLOSURES: The information contained herein has been obtained from sources believed to be reliable, but accuracy of the information cannot be guaranteed.  It should not be assumed that the recommendations made in the future will equal the performance of the securities listed on the model. For additional information, risks, fees, expenses and disclosures, refer to the accompanying Statement of Disclosures.  Not FDIC Insured.  Portfolio could lose money.