For more than sixteen years investors have experienced periods of portfolio gains followed by periods of large losses – and ended with little growth in their total wealth. We have developed a simple but powerful approach to investing in these conditions.
The goal of our investment strategy is to capture market gains when investment conditions are favorable, and protect against large losses when investment conditions are unfavorable. Making money during the good times is important, but protecting your portfolio during bad times is just as important.
Our investment approach follows three basic steps:
Understand current investment conditions. Are conditions favorable or unfavorable?
Invest in assets that benefit from those conditions
Change portfolio investments when conditions change
Investment conditions are favorable when the economy is expanding and corporate profits are growing. When conditions are favorable, we invest in a broadly diversified portfolio of growth assets, primarily high quality stocks and other securities. Growth assets have historically produced strong gains when economic conditions are favorable.
Investment conditions are unfavorable when economic growth slows, corporate profits shrink, and market momentum turns negative. Investors suffer large losses when unfavorable conditions turn into a full-blown recession.
When conditions are unfavorable, our portfolio becomes defensive. Growth assets are replaced with safety assets. During recessions, the only assets that usually prosper are high quality government bonds.
A disciplined, research-driven approach to investment strategy is the hallmark of Freestate Advisors. We have developed a consistent process to:
We don’t pretend to predict the future – that is impossible. Instead, our data-driven approach tracks investment and economic conditions, and client portfolios are changed when there is a change in conditions. Ordinarily these changes are not frequent. But we track investment conditions continuously, and when changes occur they are important.
No investment strategy wins all the time. Volatility and periodic losses are facts of life in financial markets. However we believe clients benefit from our constant attention to investment conditions and portfolio risk. Because we rigorously follow our investment discipline, clients know what to expect from us.