The seeds of our website were sown late in 2002 during when several Sun Microsystems employees got together for lunch. The conversation turned to the 50% drop in the markets and the 95% drop in Sun stock. All of our retirement plans were in ruins and someone naturally asked the question, "Well, now what do we do?"
I started studying the capital markets in 1990 and had been doing fairly well at tracking the ups and downs of the market, but during 2000 and 2001 I had been busy studying for my Java Instructor's certification and not paying attention to the market. By the time I noticed what was going on it was too late to do much about it.
By spring of 2003 I worked out a method of periodically rebalancing our 401k holdings that kept our money out of mutual funds that were losing ground. Rather than chasing performance, our objective was simply to minimize losses. I set up an in-house website to show everyone in the employee investors group which mutual funds were doing all right and which ones to avoid.
In 2012 I changed companies and opened the public website TrendlineDynamics.COM to help individual investors with a disciplined, rule-based approach to investing. The goal was to provide individual investors with a way to limit drawdowns while generating satisfying risk-adjusted returns over time.
A few years later I started writing a weekly newsletter to provide objective market analysis and guide his readers in tactical asset allocation using ETFs across a range of asset classes including global equities, bonds, and commodities. My overarching goal was to provide readers with a consistently profitable return throughout all phases of market cycles.
One half of this approach is a rule-based system using time-tested metrics to identify changes in trend and provide objective answers to the questions of which asset classes are advancing and which are declining. The other half is our Core Universe, a carefully assembled collection of about 2 dozen ETFs. The ETFs are selected from a broad spectrum of asset classes. They are chosen for: low volatility, high liquidity, low expense ratio, and low correlation to each other.
Every week we scan our Core Universe to identify every ETF which has entered a rising trend and reached a buy level. We also look which ETFs have reversed from rising to falling. Our intent is to dynamically allocate to productive asset classes and limit exposure to those that are non-productive.
We think of tactical investing as the middle ground between passive investing (which is far more risky than most people realize) and active investing, which can be thwarted by investors' own psychological biases. We employ a consistent, logical approach in order to capitalize on persistent trends.
Some people jump to the conclusion that tactical investing is the same as market timing. Market timing relies on making predictions about the future. We do not try to predict anything. We listen to what the market is telling us and use rigorous exit discipline to limit risk.
Avoiding losses is the foundation of our tactical strategy. We continually monitor each ETF's current trend using our exclusive combination of public and proprietary indicators. Our adherence to exiting as soon as the reward-to-risk ratio falls below 1 trims our losses and we let the profits take care of themselves.