Investment Strategies

The Mode Determines the Investment Strategy

Alpha Mode

When conditions are strong, one could consider being more aggressive and profit-seeking. Being in Alpha Mode, a portfolio could invest in a collection of individual stocks, ETFs and mutual funds that have a track record of beating the market. Investments could be growth heavy and have a heavier weighting in offensive sectors or industries displaying relative strength. It is key to know when to exit Alpha Mode to hold on to profits.

Beta Mode

When conditions are mixed, one could consider staying invested in equities, while being cautious and selective. Being in Beta Mode, a portfolio could invest in the passive indices, ETFs, quality stocks and Growth at a Reasonable Price (GARP) stocks. Risky stocks with unreasonably high valuation ratios should be avoided. It is key to have an exit plan or know when to implement downside protection.

Risk Management Mode

When conditions are weak, one should focus on risk management and not on making big returns. Attempting to make big returns in an environment of growing risks is where losses can occur. Reallocating to lower volatility asset classes, raising cash and implementing option hedges for managing downside risk is key.