The Market Cycle Investment Management (MCIM) methodology was developed in the 1970s. 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 "The Brainwashing of the American Investor" and in hundreds of investment articles. MCIM portfolios, with their income growing foundation, are especially well designed for use in retirement savings (IRA) and investment (Self Directed 401k) programs.
As the investor ages, it's a simple matter to transition from a more aggressive "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) a "zero % equity" 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 Program
Regardless of direction, all cyclical movements should be excellent investment opportunities for retirement focused investors. MCIM portfolios befriend market, economic, and interest rate cycles using volatility friendly strategies that logically could produce:
ONE: Moves to cash before corrections take over from stock market rallies: Profit taking disciplines kick in as securities rise 7% to 10% above cost basis. At the same time, buying guidelines preclude purchase of equities before they are down at least 20% from 52-week highs. These disciplines produce high equity allocation "Smart Cash" levels during significant rallies.
TWO: Higher market value "lows" during corrections: MCIM Portfolios include a "base Income" floor produced by a) an allocation of at least 40% to income purpose securities, b) additional income from all equity securities in the portfolio, 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
THREE: Annual growth of realized "base income": Cost based asset allocation dictates that from 40% to 100% of all realized income will be reinvested as soon as practical in income-purpose securities.
FOUR: Faster movement to new market value highs during the next rally because: a) Fewer new equity positions may be established until a minimum 20% price erosion has occurred, making the manager more patient, b) programmed additional income assures cash availability for security purchase throughout corrections, and c) a flexible selling discipline that allows the manager to take smaller than target profits when buying opportunities are plentiful.
FIVE: No major disappearing "unrealized" profits because of strict profit-taking rules and manager discipline.
SIX: 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 approach might have worked for most investors during this interesting segment of financial history.
Peak - Trough - Peak Analysis From Before the Financial Crisis 'Till 7/31/15
Market Cycle Investment Management takes the "what to do now" product shopping confusion out of inexperienced hands and focuses decision-making responsibility squarely on the manager. Investors can expect MCIM managers to buy only the best quality companies, and only when they are at clearly defined "bargain" prices.
Also, MCIM managers always take profits when targets are reached and are trained to remain focused on growing retirement income for future use by the investor.
The Market Cycle Investment Management, "cost based asset allocation" methodology keeps portfolios on a high quality, growth and income, track from start up through retirement, without head scratching or rebalancing. The approach is best suited for use in tax deferred, self directed 401(k) and IRA portfolios.
Tax Free/Tax Advantaged portfolio management is equally benefitted from MCIM disciplines.