Ending the worry over timing risk
One of the most frustrating things in investing is timing risk. The risk of putting money to work in the “wrong things” at the “wrong time.” 2018 was an unpleasant reminder that timing risk is an ever-present problem. Pretty much every investor in the world that allocated to any new strategy experienced the pain of timing risk. However, here are the four key action items Tempus utilizes to help lessen this nagging uncertainty.
Identify an Appropriate Risk/Reward Objective
A common mistake when markets continually rise is the tendency to become “risk-complacent.” Determine, then align, your ability and willingness to take risk with an ecosystem of diversified downside risk mitigation strategies.
Deploy an Ecosystem of Strategies
The greatest benefit of using an ecosystem of strategies is the diversification of downside risk mitigation tactics. Because there is no such thing as a perfect strategy, blending multiple approaches together limits the risk that too much of a portfolio is in one strategy. When market volatility and timing risk rears its ugly head, as we just experienced from October to December, having an ecosystem in place can be a portfolio savior.
Set a Benchmark
Each investment strategy should have a clearly defined benchmark to set expectations and monitor performance. When markets get choppy, benchmarks serve as a reminder that everything is relative, helping to keep emotions in check.
Set an Appropriate Time Frame
In periods of market stress, emotions run high in the short-term, we are human, after all! Try not to lose sight that a strategy is about the combined effects of many decisions made over time to most efficiently compound over the long term. Not every decision in a strategy will be perfect but having a well-documented and researched approach is far better than guessing, “letting it ride,” or hopping from one solution to the next.
The Bottom Line
Tempus Advisory Group provides a comprehensive approach to downside risk and asset management by establishing a customized ecosystem aligned to your unique risk/reward objectives. Each strategy of the ecosystem follows a rules-based data driven set of mathematics calculated daily to determine positioning on a weekly to monthly basis. Each strategy has a clearly defined benchmark, range of expectations, and is continuously monitored to help minimize the impact of timing risk over the long term.
Financial Advice is offered through Mid Atlantic Financial Management, Inc. (MAFM) a Registered Investment Advisor. Tempus Advisory Group is not a registered entity or a subsidiary or control affiliate of MAFM. This information should not be duplicated or distributed unless an express written consent is obtained from Tempus Advisory Group in advance. The views expressed here reflect the views of the Tempus Advisory Group Investment Committee as of 1-14-2019. These views may change as market or other conditions change. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either.
