Moller Financial does not try to predict what the market is going to do tomorrow or six months from now. Instead, we look for ways to help you successfully reach your goals with a high level of confidence. We do this by implementing and following rules-based investment strategies.
This strategy begins with setting a target allocation for each investment - for example 50% to U.S stocks and 50% to international stocks. As prices go up or down, these allocations will change over time. If an investment's allocation falls too far below the target, we buy more. Likewise, if an investment's allocation increases too far above its target, we sell some. This rules-based process is known as rebalancing and is a way to buy low and sell high - a nice outcome indeed.
One of the characteristics of this approach is that the portfolio is always fully invested, including during periods of temporary significant declines. Through opportunistically rebalancing and saving, clients can use these temporary declines to their advantage - buying stocks when they are on sale.
Risk Management Strategies
For clients approaching or in retirement, the focus often turns to reducing volatility as they transition to living off the portfolio. Moller Financial has developed two approaches to minimize the effects of significant market declines.
This approach allocates the portfolio to a globally diversified mix of stock investments, as long as they are in a "positive" trend. If the recent performance of an investment is lower than Treasury Bills, we will move that allocation to cash. Investments with a better recent performance compared to Treasury Bills will be invested. As with the Dynamic Allocation Strategy, the objective is to avoid investing in areas that are in extended market declines.
This approach begins with a broad global mix of stocks, bonds, cash, gold, and commodities. Each month, we monitor and rank the recent performance for each of these investments. The top-ranked investments receive an allocation in the portfolio while the others do not. Thus, the allocation trades more frequently than our other investment strategies. Dynamic Allocation's ability to manage risk does not come from picking the best investments, but rather from avoiding the worst declines.