Why Tactical Portfolio Management?

A long-term perspective of the Dow Jones Industrial Average since 1896 reveals the reality that there are extended periods of time in which the US equity market will trend generally upward, and also lengthy periods of time where the market will instead stagnate or move generally lower. There have been nine such alternating cycles since 1896, with each averaging 14 years in duration. Let’s say an individual begins to accumulate meaningful wealth with which to invest around the age of 40, and has a life expectancy of about 85 years, he or she will likely experience three of these cycles during their investment lifespan. With this in mind, it is important to have at one’s disposal strategies that are effective in both generally rising (bull) markets and falling (bear, or “fair”) markets.

As such, many years ago 1st & Main Investment Advisors undertook the exercise of examining risk-management as the primary orientation of what we deemed our Tactical Allocation Portfolio (TAP). Through a variety of trials, employing a large amount of statistical analysis, we created the initial formation of our approach. Always looking to improve, the model itself has witnessed a handful of enhancement over the last decade. Since the inception of TAP we have expanded our model offerings, maintaining the original model for households with less than $150,000 in equity exposure in their respective accounts. For those with assets in excess of that amount we developed what we deem our Sector Equities (SEC EQ) model. SEC EQ favors a heavier tilt to individual equities and is less reliant on sector based Exchange Traded Funds (ETFs) in terms of diversification. This allows us to target only those companies within a sector based ‘sleeve’ that are showing  a measurable positive trend. All while maintaining similar risk-adjusted return metrics as TAP. We are happy to discuss which model fits the needs of those we work with at any time.