Fee-Based Investment Management for a Confident Retirement Experience
Our investment management strategy is designed specifically for clients who have worked hard to build a nest egg and are ready to enjoy the fruits of their labor. The strategy contains 4 separate parts:
- Strategic Allocation,
- Tactical Overweight,
- Risk Overlay, and
- Recession Protocol™.
All portfolio returns are related, in some way, to an investor's ability to endure market risk. We help you determine your true risk tolerance. Afterwards, we build a portfolio designed specifically for you, to meet your goals. Research has indicated that an investor's ability to understand, feel confident in, and stick to an investment plan is the most important factor in getting high returns... especially in retirement.
We coach our clients so they can stick to their investment strategy throughout retirement. Most market moves are unpredictable - and successful investors stick to their investment policy despite the market gyrations that occasionally occur. Having a portfolio that is too aggressive - which you abandon as soon as the market moves against you - only makes your journey more difficult. Conversely, investing in a portfolio which is not aggressive enough to beat inflation and taxes is also a counterproductive. 'Going Broke Safely' is not an acceptable strategy for retirement! Our High Confidence Investment Strategy seeks market returns - adjusted for your risk tolerance - but with built-in safety features designed to allow you to enjoy a comfortable and optimistic investment experience.
PARAGON's Money Management Strategy - Ideal for Nearing or Living in Retirement
PARAGON’s investment management strategy can be best described as follows:
Strategic Allocation + Tactical Overweight + Risk Overlay+ Recession Protocol™
The building blocks of our portfolios are low-cost, tax efficient exchange traded funds (ETFs), institutional mutual funds, or individual fixed income securities (bonds). We are not stock-pickers, and use strategies that lower your costs to capture as much of the market's return as possible.
- Strategic Allocation: This concept addresses the “weights” we assign to various asset classes such as large or small stocks, international stocks, growth versus value stocks, and various types and maturity dates of bonds within the portfolio. The weighting of these asset classes will vary depending upon where we are in the current economic cycle. We adjust our strategic allocation occasionally.
- Tactical Overweight: Sometimes, certain sectors predictably outperform the market. Examples might be real estate, technology, health care, etc. We typically have one or two tactical sectors within the portfolio at any given time. We adjust our tactical sectors as market conditions dictate.
- Risk Overlay: Since our portfolios are diversified across many sectors, asset classes, and countries – PARAGON’s primary portfolio risk is known as “market risk.” We manage market risk by varying the percent of “risky” assets (i.e., stocks) within the portfolio versus safer assets (i.e., bonds). For example, if a portfolio consists of 60% stocks and 40% bonds, and the market drops by 20%, it is reasonable to expect that portfolio will drop by approximately 12%. Since, over the long term, stocks tend to outperform bonds, a portfolio with more stocks will likely generate a higher return over time. Every PARAGON client understands – and we mutually agree upon – their personal risk level prior to investing any money. YOUR risk level is adjusted only after discussions with you.
- Recession Protocol™: The largest market drops (and investor losses) have always been caused by recessions. Examples are the Great Recession in 2008, the Tech Bubble Recession in 2000, and the Oil Embargo/Hyperinflation Recession that occurred in 1974. Stock market crashes during recessions have destroyed the retirement dreams of many investors retiring at the wrong time. The advice of most advisors, such as, "invest for the long term," “hold on, it will come back,” and “this is a buying opportunity” works only if you are a young investor with plenty of time to recover and money to invest. "Buy and Hold" does not work if you suffer a large market loss while taking withdrawals to sustain your standard of living. We offer an alternative. We seek to protect retirement accounts by avoiding those losses in the first place!
PARAGON is one of the few investment advisory firms that take a proactive approach to avoid losing money during recessions. Recessions are not random events – they are a normal part of every economic cycle. All economic cycles eventually come to an end, and the “reset button” is the economic contraction that we know as a recession. Recessions come with specific markers, such as an inverted yield curve, accelerating unemployment, a slowdown in new home construction, a decline in durable goods orders, and more.
PARAGON employs multiple data sources and algorithms designed to alert us of oncoming recession. When a recession is indicated, it is PARAGON’s policy to trade all client accounts entirely out of stocks and into safer assets that tend to do well during economic downturns – such as Treasury bonds. This is known as our “Recession Protocol™.”
We have the technology to effectively perform this action, and we train on it routinely. We can execute Recession Protocol™ within one day across all client accounts if necessary.
We seek high returns - but even more so, we seek to avoid losing money!
Safety of Your Assets:
All client assets are invested in your name, with qualified custodians - national firms that provide trading, custody, and brokerage services to registered investment advisors, trust institutions, and third party administrators. Currently, we offer institutional-level accounts with both Fidelity and TD Ameritrade. Both firms meet strict regulatory guidelines, have superior trading platforms, and each account is protected by the Securities Investor Protection Corporation (SIPC) for up to $500,000 in securities and $100,000 in cash. Additionally, both firms provide an extra level of coverage from Lloyd’s of London for nearly unlimited amounts of securities and up to $1.9 million in cash, and offer significant pricing discounts for our clients that individuals are unable to negotiate on their own. PARAGON never takes custody of client money or securities, clients receive monthly statements directly from their custodian, and can view their accounts and the investments they own 24 hours per day, 7 days per week, by logging in to Fidelity.com or TDAmeritrade.com.
Our Strategies Are Based Upon 3 Components
Three Factor Model
Kenneth French and Eugene Fama's research determined which sources of risk the market rewards with higher returns, and which risks add no real value to a portfolio. By utilizing this research, we believe it is possible to 1) identify which market segments should be held, and which should generally be avoided and 2) calculate an expected return in a portfolio that is held over a reasonably long period of time. Click here to see more information on the Three Factor Model.
Efficient Market Hypothesis
Today's markets are efficient at setting proper prices. Rarely do stock-pickers outperform their market segments for long - and almost never without incurring more risk. Even more difficult is trying to pick managers or mutual funds who will outperform - in advance. Investors have far higher success rates by owning investments that seek to capture the entire returns of each market segment - at the lowest possible cost, with the least tax impact. This means we avoid high-cost investment strategies. We do, however, make changes as markets and economic cycles change.
Modern Portfolio Theory
MPT is a Nobel-Prize winning investment theory which helps investors construct portfolios designed to maximize their expected returns for their specific risk tolerance. PARAGON uses MPT as an initial framework for our investment policy, but because of the limitations MPT displayed during the tech bubble crash in 2001 and the Great Recession in 2008, we tend to be much more tactical in our actual implementation of investment management. However, for reference, a detailed overview of Modern Portfolio Theory can be found here.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Investment Advisory Services Provided by Paragon Wealth Strategies, LLC, a registered investment adviser.