The Market Cycle Investment Management (MCIM) methodology was developed in the 1970s by private investor Steve Selengut. The process combines risk minimization, base income generation, and disciplined trading strategies while focusing on the highest quality companies, in terms of fundamentals.
If you speak MPT, these Investment Grade Value Stocks are generally "low beta" securities.
MCIM concepts, strategies, and processes are explained and illustrated in Mr. Selengut's books and articles. The three "Life Cycle" portfolios were specifically designed for use in retirement-destined savings/investment programs.
As the investor ages, it's a simple matter to transition from a more agressive "max-70%" equity asset allocation to a more conservative 50% equity exposure. As retirement looms larger on the horizon (and for the first few years of investing) the "max 20% equity" asset allocation may be most suitable.
For more information, Google "Market Cycle Investment Management" and "Investment Grade Value Stock Index, or search the article archive at Kiawah Golf Investment Seminars.
Reasonable Performance Expectations using the MCIM "Life Cycle" Program
Regardless of direction, all cyclical movements should be excellent investment opportunities for retirement focused investors. MCIM "Life Cycle" portfolios befriend market, economic, and interest rate cycles using volatility friendly strategies that logically could produce:
Moves to cash before corrections take over from stock market rallies: Profit taking disciplines kick in as securities rise 7% to 10% above their cost basis. At the same time, buying guidelines preclude purchase of IGVSI equities that are not down at least 20% from their 52-week highs. These disciplines produce high equity allocation "Smart Cash" levels during significant rallies.
Higher market value "lows" during corrections: Portfolios include a "base Income" floor produced by a) an allocation of at least 30% of "Working Capital Assets" to income purpose securities, b) additional income from all equity securities in the portfolios, and c) the likelihood that both income CEFs and Investment Grade Value Stocks will fall less in market value and rebound more quickly than securities of lesser fundamental quality.
Peak to Trough to Peak Analysis Around the Financial Crisis
Annual growth of realized "base income" in all portfolios: Cost based asset allocation dictates that at lease 30%, 50%, or 80% of all realized income will be reinvested as soon as practical in income-purpose securities.
Faster movement to new market value highs when the market moves upward because: (a) Fewer new positions can be established until significant (20%) equity price erosion has occurred, making the manager more patient, (b) programmed additional income assures cash availability for security purchase throughout corrections, and (c) a selling discipline that makes the manager take smaller than target profits so long as buying opportunities are plentiful.
No major disappearing "unrealized" profits because of strict profit-taking rules and manager discipline.
Reduction of analysis paralysis, appreciation of both rallies and corrections, and love of market volatility.
The past fifteen years have included two major market cycles and one significant economic crisis. Study the methodology to see how well the MCIM "Life Cycle" approach might just have worked for you and your clients during this interesting segment of financial history.
Peak to Trough to Peak Analysis From Before the Financial Crisis 'Till Now
"Life Cycle" portfolios take the "what to do now" product shopping confusion out of inexperienced hands and focuses decision-making responsibility squarely on the manager. We do not follow the crowd. Investors can expect our managers to buy only the best quality companies, and only when they are at clearly defined "bargain" prices.
Our managers always take profits when targets are reached and remain focused on the all important task of growing retirement income for future use by participants. We have no other agenda.
All investors should become familiar with the Market Cycle Investment Management methodology and the strategies it employs to keep portfolios on the right track from start up into retirement.
All three "Life Cycle" portfolios are available at or before retirement in individual 401(k) and rollover IRA portfolios under a private management ageement.
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