Broker Check

Managing Investment Risk

Imagine you are the captain of a large cargo ship and you are leaving port for the open sea. The skies are blue and the seas are calm. It is a beautiful day.

When you reach the wheel house you see on the radar screen a large storm, possibly a hurricane that is 150 miles beyond the horizon. As the captain of the ship you have a duty and obligation to prepare to navigate through, or around the storm to protect the crew and cargo entrusted to your care.

Just as hurricanes develop in the ocean, there are storms and hurricanes that develop in the stock market. As risk managers, our job is to help protect client’s cargo (assets) during stock market storms and help them safely arrive to their financial destination. The radar system we use to guide us through the stock market is called The Hurricane Indicator™.

The “Hurricane Indicator”™ is a mechanical indicator that helps identify when risk in the stock market is high or low. When risk is higher than the potential returns of the market, we become more defensive and move additional money to bonds and other conservative investments. When risk in the market is low and potential returns outweigh the potential risk we are taking, we move more money into stocks.

The “Hurricane Indicator”™ has served as a trend indicator helping to identifying when the long-term trend in place may be changing. It is not perfect but the “Hurricane Indicator”™ has served as a guide in helping keep us on the right side of the market for over 20 years.

Current Hurricane Indicator

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