Arrowhead-Asset-Management

P.O. Box 2049
Wimberley, TX 78676
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Arrowhead Asset Management Investment & Money Update (11/18/2017)

A Summary of Our 2018 Money Management Strategy 

As the true colors of the Trump kleptocracy get even darker, combined with the growth sectors and regions of the global stock markets getting tired, it’s time we begin making “tweaks” to our Arrowhead Asset Management investment portfolio strategy.

I am not calling a top in the stock bull market. But I do believe we should begin preparing for a slowdown in the ascent of the stock markets - including some asset rotation toward heretofore unfavored investments that are starting to see institutional buying interest.

We’ll make these market adjustments by 1) reducing the percentages of our current growth investments that have done well for us (technology, industrials, etc.) and 2) rotating money into investments that are starting to attract new institutional money.

Preferred Investments Going Forward - to Minimize Market Risk 

Starting as soon as the markets indicate, we will be focusing most of our future investments on electronically traded mutual funds (ETFs) and some traditional “open-end” mutual funds that we have ignored to date.

Specifically, within the global stock market universe, we will be investing in assets classes, sectors, and industries within sectors, depending on whether the investments are in a market uptrend (or not) such as:

  1. US Diversified large / midsize / small company stock ETFs and funds;

  2. Global Region (ex US) Diversified large / midsize / small company ETFs and funds;

  3. US Business Sector Stock ETFs and funds, e.g. Health Care, Consumer Cyclicals, etc.

  4. US Industry-specific Stocks ETFs and funds e.g. Internet, Biotech, etc.

  5. Global Business Sector Stocks ETFs and funds: Euro Financials, China, etc.

  6. US and global real estate investment trusts (REITs) ETFs for income

  7. Global Commodity “Price-only” ETFs (Gold, oil, natural gas, commodities, etc.)

Second, within the global bond market universe, we may invest in these bond asset classes and global region bonds, assuming these income-focused investments are in a bond market uptrend (or not):

     1. US and Global Bonds ETFs / funds in the Americas, Europe, & Asia)

     2. Developing (emerging) market corporate and government bonds

Note: Bonds generally perform poorly in a rising interest rate / inflationary market environment.

Third, in our Fidelity higher education ORP/403b portfolios, we will be using the same investment strategy, being limited to the investment choices allowed by your educational employer. Fortunately, performance wise, employer-specific investment limitations have not curtailed the long-term growth or risk profile of your Fidelity ORP/403b portfolios under our management.

Finally, going forward, we will be investing very little in individual stocksWith the stock markets possibly maturing into the latter stage of this current bull market, individual stocks are becoming risky and more volatile. At this time, we want to limit risk rather than exacerbate risk. Hence, individual stocks are very vulnerable to losses (and gains) every three months when they report their quarterly earnings.

Comparatively, based on a reward to risk probability, we can achieve 75% of the market gains using sector and industry ETFs and mutual funds - while incurring only 50% of the market risk investing in individual stocks. For retirement-focused investment portfolios, investing individual stocks is an unnecessary added risk.  

Please contact me if you have any questions about this Update - or your current Fidelity portfolios.

Rocky Boschert

512-751-7363
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