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Dynamic
Asset Management Normalized Overview and
Procedure Summary Dynamic Asset Management Normalized (DAMN) is a low risk, low maintenance plan for long-term investing. It is based on the principles of asset allocation, diversification, and an effective market timing strategy. Funds are invested in asset classes that historically have been poorly-correlated; several investments within each asset class provide diversification; and buy and sell signals are determined through technical analysis of the market which results in enhanced growth by reducing losses during market downturns. Financial resources are invested in equal amounts in the five asset classes noted below (these are followed by descriptions and the currently recommended investments). Exchange traded funds or mutual funds are used, the choice of which may vary depending on an assessment of economic conditions and the availability of suitable funds. 1. Fixed Income (Bonds, other Debt instruments, Cash and Cash Equivalents) – [AGG] 2. Domestic Equities (Stocks of U.S. companies) – [SPY] 3. Emerging Markets Equities and/or Debt Instruments – [EEM] 4. Commodities or Hedges (Precious Metals incl. Gold, Energy, Agribusiness, etc.) – [GLD] 5. Real Estate (REITs) - [IYR] Note that after allocating 20% of your stake to each of the five asset classes, manual rebalancing according to a preset timetable to achieve predetermined target percentages is not required because the portfolio automatically self-adjusts and optimizes returns while limiting losses. Buy/sell/hold determinations utilize a simple two-moving-average strategy involving a “fast” moving average and a “slow” moving average: Invest in a particular class/fund when and only when its fast moving average is greater than its slow moving average, sell a fund when its fast moving average is less than its slow moving average, and keep the proceeds of closed positions in cash until a buying opportunity is signaled for that particular asset class. One of the beauties of this system is that decisions are not required, you don’t have to worry about when to be in the market or when to be out, you just trade when the strategy so indicates. Although each asset class is treated separately with respect to when to buy, hold, or sell, the proceeds from the sale of all investments are comingled in the same brokerage account (which is also used for all purchases). The moving averages employed are 30day (fast) and 90day (slow) simple moving averages of the securities’ daily closing price. A central element of this strategy is that portfolio evaluation is made only once every month and typically requires only about ten to fifteen minutes to complete. Very little time, therefore, has to be devoted to program maintenance; you don’t have to be watching the portfolio during the month which reduces stress, and the infrequent trades (the system signals approximately five trades per year on average) results in increased portfolio value. Please read the cautionary notes and disclaimer on the last page of this document. If you would like to learn more about this approach feel free to contact me at the email address below. Barry Beiderman March 16, 2013 |