After nearly a 20 year run in the stock markets from 1982-2000, which helped solidify the buy and hold belief, many investors are frustrated with how their portfolios have performed over the last 10 years; with little to negative overall returns.  The term "draw-down" is defined as the drop of an index or portfolio from a peak to a trough.  Most recent, the S&P 500 experienced a decrease from 10/07 to 3/09 of -55.32% and during the bursting of the tech bubble from 8/00 through 9/02, -44.71%.  With these types of dramatic decreases, it can take a long time for a buy and hold portfolio to recover.  Remember, if a portfolio drops by 50%, it needs to increase by 100%, not 50%, to break even!  The key to understanding how to profit in a Secular Bear environment is to realize that you can't make money from just riding the secular trend up.  Unlike 1982-2000, when the secular trend was bullish and essentially went straight up, the current grand trend has been sideways over the last decade.  This is common behavior for Secular Bears and previous ones, like 1966-1982, acted very similar.  Where the opportunity lies for profit is by recognizing the Cyclical cycles that occur within the grand secular trend that is overshadowing them.  On average, Cyclical cycles tend to last anywhere from 2-5 years and typically have a bottom, bull, top and bear phase.  Let me share how we navigate these types of environments.

Our equity portfolios were designed to combat market conditions like we have experienced over the last 10 years.  We believe, and our system has proven it, that the ability to be nimble and protect capital when risk increases is critical to profiting during Secular Bear environments.  By avoiding the major draw-downs as mentioned above and capitalizing on the Cyclical Bull runs that occur intermittently throughout the cycle, investors can position themselves for the returns that they expect to receive for taking on the risks involved with investing in the equity markets.  We also believe that human emotion has no place in an investment strategy and has proven to be the catalyst leading to the demise of many investment portfolios.  Our research is derived from our quantitative model, which has been stress-tested over the last 10 years!  It crunches the historical data of the 9 sectors of the S&P 500 and then overlays technical trends to understand the probability of each of the sectors continued up or down price movement.  Since 2001, our strategy has weathered the storm by avoiding the massive draw-downs mentioned above and participated in the growth of the market.  Achieving these two objectives has produced significant out-performance.

We also specialize in customized Options Strategies that are tailored to each client's needs.  Many folks have a cursory knowledge of Options and how they work but have only dabbled with the lower probability strategies that turn out to be more of a gamble than an actual strategy.  At Volt, we utilize high probability strategies and take a systematic approach to increasing returns in portfolios.  As an example, many clients have a larger portion of their assets currently in cash but are frustrated with the low yields that fixed income products are paying.  We've developed an Options Strategy that aims to maintain the cash position and produce returns that are significantly higher than current yields.  Another strategy is designed for clients that hold large concentrated stock positions or diversified portfolios that they do not wish to re-allocate.  They can benefit from our "Portfolio Overlay" Strategy as it looks to produce additional portfolio income that is attained independently of the positions in the portfolio.  Options are powerful tools when combating Secular Bear environments because these strategies are designed to make money in up, down or sideways markets.

The key to keeping your sanity in these types of environments is to have a disciplined, systematic approach in place.  It needs be nimble, remove emotion and protect capital when the market sours.  Many investors are nearly to the point of throwing their hands in the air in frustration and exiting the equity markets altogether.  We feel this is a drastic move and a mistake as there are many opportunities to profit in this environment.  You just have to know where to look!  If the past is at all indicative of the future we may still be in this Secular Bear for a while; an environment full of uncertainty, volatility and a general negative vibe!  As explained above, our strategies are designed for the market conditions we are currently experiencing.  If you are uncertain how these strategies may fit into what you are currently doing, please do not hesitate to call or email us with questions.  Also, we would be happy to review your current situation to see how you are positioned to continue weathering the storm we are in the midst of.