KEYSTONE RETIREMENT RESOURCES
Here are three major characteristics of Fact-Based Investing:
We zero in on measurements that reflect the continuous tug-of-war between supply and demand. We believe that every single tick in the market - and every trend - results from imbalances in supply and demand. After all, if there were no imbalance of supply and demand, prices wouldn't budge at all! And longer-running trends are, in our view, are driven by longer-term imbalances in supply and demand.
Our implementation of a Fact-Based Strategy requires just two kinds of tools:
Here is our primary tool for identifying major trends, called the Bull-Bear Indicator:
The job of the Bull-Bear Indicator is to determine when a new Bull Market or a new Bear Market has emerged. Once again, this is a measurement of ‘what is’, with no predictions or academic theories involved.
Our goal is to be defensive and protected in Bear Markets, and to be fully-invested during Bull Markets.
The second tool of our Fact-Based Strategy seeks to identify high-performance portfolio candidates:
Momentum, relative strength, rate-of-change, nearness-to-52-week-highs, and other measurements of performance characteristics, are all combined to produce rankings of portfolio candidates.
High-performers are selected, low-performers are discarded, and the whole process is repeated at regular intervals, usually quarterly. This process of continuous self-renewal is intended to capture the benefits of long-term winners, without being dragged-down by the unnecessary inclusion of under-performers!
Combining these two tools gives us a simple-yet-complete strategy, providing guidance on when to be defensive and when to be offensive and, when we are offensive, how to construct high-performance portfolios.
Fact-Based Investing, concentrating on the ‘what is’ of Market supply and demand, rejects the ‘what might be’ of Prediction-Based Investing and the ‘what ought to be’ of Theory-Based Investing.
By combining trend identification and high-performance portfolio selection, our Fact-Based Investing strategy gives us what we believe to be the best chance of achieving our twin goals: