In theory, most tactical investment management styles can be grouped into one of three categories: partially tactical, fully tactical but non-diversified, and our approach – fully tactical with actual diversification.  


The partially tactical management style typically begins with a base asset allocation with exposure to different types of stocks and bonds. This exposure is then varied, within limits, based on the market analysis. The partially tactical approach can still expose investors to unacceptable losses during market downturns and can also be a drag on performance during market upturns. Regardless of the market environment, partially tactical management will typically have some exposure to every asset class.


The fully tactical but non-diversified management style generally allows for movement to 100% stocks, 100% bonds or 100% cash depending on their market analysis. However, it commonly follows only one methodology. During any given period, a particular methodology may or may not be in favor. Limiting a strategy to only one style can expose clients to unacceptable losses when it cycles out of favor.


It is our philosophy that proper tactical investment management should be based on determining current short- to long-term market trends and countertrends. It should allocate money to the appropriate investment style or area dictated by the trend, following actual diversification principles.

​It is essential to make these decisions based on verified trends only, rather than based on the news or market action of the day. This results in being positioned in the right investments at the right time or out of the market completely when necessary.


The prevailing investing wisdom of Modern Portfolio Theory promotes that risk can be minimized through diversification. The broader the diversification, the better off the client will be. This is based on the assumption that not everything can go down at the same time. Attempts at diversification are often made by investing in a broad collection of non-correlated asset classes. This means that such assets have the appearance of not being tied to one another. One asset goes up while another goes down. The goal is that more assets increase in value than decrease in value over time. This is more perceived than actual diversification. Perceived diversification can be dangerous in a down market.

Actions taken in one area can often impact other areas. Not all assets are correlated in the same way all the time. Since markets can now become correlated with very little notice, this approach can be risky. In a bad market, everything goes down, as investors abandon their positions and move to cash – usually after taking a huge loss.
For instance:

  1.  Small stocks are often highly correlated with large- and mid-cap stocks.
  2.  Market action in one country is often highly correlated with what is happening in another country.
  3.  Assets defined as diverse or non-correlated can all move down at the same time.

To achieve actual diversification, tactical investment management should use the proper methodology and timeframe variation to design each investment strategy. Specific market baskets representative of the sectors with the strongest momentum are created. Underwater correlation studies are done to determine how correlated one methodology is to another methodology during a downturn.


Underwater correlation is a better calculation to use compared to traditional correlation. There is little concern if all asset classes are performing well together. However, there is concern if they are all declining at the same time.

While general correlation has some merit, tactical management puts a stronger emphasis on underwater correlation. This indicates the extent of correlation between different asset classes or methodologies during periods of drawdown. Asset classes or return streams, which appear uncorrelated during market upturns, can easily become correlated during market downturns.

The advantages of underwater correlation analysis are that it:

  1. Combines methodologies that are not correlated during drawdown periods.
  2. Focuses on correlation when it matters most, during drawdowns, instead of during upturns.

The results are well-designed strategies stemming from well-planned models of specific markets. The strategies then blend a variety of ETFs, index funds and other mutual funds. Portfolios are customized by combining the strategies based on the needs and time horizons of the individual client.


​A market basket can become the potential selection of investment for a given methodology. Because of this, constant evaluation of all asset classes and market sectors need to be maintained. This is in contrast to having fixed allocations to stock and bond markets.

Different market baskets can manage the risk vs. return component of a methodology. For example, adding bonds to the basket can decrease risk and return, whereas adding commodities can increase risk and return.


You’ve probably been planning for retirement in some way, shape, or form for many years. Maybe you participate in your company’s 401(k) plan or set aside money in a traditional or Roth IRA. Maybe your employer offers a pension plan. All of those are important retirement income planning actions. As you get closer to retirement, it’s important to plan for your retirement income in specific detail.

  • How much money will I have coming in the door every month?
  • Will I have enough income to cover my expenses in retirement?
  • Is my retirement income guaranteed or could it fluctuate?

Download our Free, No Obligation Guide “5 Things Everyone Should Know About Retirement Income”, to help begin asking some very important questions regarding your retirement income.