CMG AdvisorCentral

Tactical investing news, views and resources for financial advisors

Archives for May 2014

How to Measure Risk in Investments

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Michael Hee Managing Director, Investment Research CMG

Michael Hee
Managing Director, Investment Research
CMG

In my previous post we discussed “What is Risk.”  As a follow-up, we will begin to explore how to measure risk.  When considering investment options, analyzing performance statistics without consideration of risk does not provide a view of the complete picture.

One of the most common measurements of risk is standard deviation, which statistically measures how observations are dispersed around a central tendency.  From an investment perspective, standard deviation measures how performance may be dispersed about an expected return.

For example, from January 1, 2007 through December 31, 2013, the annualized return of the S&P 500 TR Index was +6.13%.  As a comparison, the return of the Barclays Aggregate Bond TR Index (Agg Bond) was +4.91%.   However, the standard deviation of the S&P 500 Index was 16.91% compared to 3.44% for the Agg Bond.  From an average return perspective, not much difference, however the potential dispersion is significant.

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Avoid Getting Soaked When Bond Bubble Bursts

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Steve Blumenthal writes in Forbes about investment strategies to prepare for the bursting of the bond bubbleCMG CEO Steve Blumenthal has penned his first Forbes piece, titled How Not To Get Soaked When The Bond Bubble Bursts. Steve will be writing about bonds, stocks, alternative investments, tactical investing strategies and the markets regularly for Forbes. See Steve Blumenthal’s Forbes contributor bio and sign up for updates. The beginning of the Forbes story:

Most investors are unaware and ill-prepared for the impact that rising interest rates will have on their bond funds and ETF investments. What can you do? Tactically trade your bond funds and bond ETFs.

Also, in this week’s On My Radar titled Stumble Upon the Truth and Act, Steve writes that high yield bonds have gone from way overvalued to way, way overvalued. An excerpt:

Trading high yield bonds for nearly 24 years has taught me a thing or two about opportunity and risk.  Today, I share my current thoughts on high yield.  In short, I feel good, really good and, frankly, that is what is troubling me.  The last several times I felt this way a major sell-off followed.  Be prepared and properly position for an outstanding once in a decade opportunity.  It is coming.

See the latest Research & Insight from CMG and CMG News.

Tepper Tantrum

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PJ Grzywacz President, Chief Compliance Officer, CMG Capital Management Group

PJ Grzywacz
President & CCO
CMG

The market had a Tepper Tantrum last week. We all know what a taper tantrum is after the Fed backtracked on tapering its bond buying program last year. But what is a Tepper Tantrum?

David Tepper, aside from being a fellow Carnegie Mellon alumnus, is one of the most well-known money managers in the world. His firm, Appaloosa Management, manages more than $20 billion.  More importantly, Mr. Tepper has been right about equity markets.

Since the financial crisis, few investors have matched Tepper’s track record. His ability to read the tea leaves of Fed policy has made him a market sage.  So when David Tepper speaks, the market listens. It didn’t like what it heard last week, namely, that it’s time to take some chips off the table.  Mr. Tepper didn’t really say anything new; many market observers (ourselves included) have been highlighting the elevated risk at these equity market levels, but investors like winners, and Tepper’s winning calls have made him the highest paid hedge fund manager over the last two years.

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The Choice of Action

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Michael F. Sciortino, Sr. Executive Vice President, Managing Director, Head of Distribution, CMG Capital Management Group

Michael F. Sciortino, Sr.
Executive Vice President, Managing Director, Head of Distribution
CMG

Let’s begin by looking at some advice from John Wesley…

Do all the good you can,
By all the means you can,
In all the ways you can,
To all the people you can,
For as long as you ever can.

Wow, that’s a lot of action! If you do this, what you will accomplish will amaze you. Ultimately, fulfillment in life comes from making a difference in other people’s lives. How? By helping people (in this case, your clients) make positive changes in their lives. Holding back and giving less than our best effort is never better than action. We as advisors are called to take action right now.

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Wrapping Up Envestnet Advisor Summit

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Michael F. Sciortino, Sr. Executive Vice President, Managing Director, Head of Distribution, CMG Capital Management Group

Michael F. Sciortino, Sr.
EVP, Managing Director, Head of Distribution
CMG

We’ve had a wonderful time these past couple days at the Envestnet Advisor Summit in Chicago. This year’s theme, “The Next Big Idea,” fit perfectly into our distinction as investment professionals. Our Big Idea is that tactical investment strategies are a necessary component to any diversified portfolio.

As we heard several times at the Conference, adding alternatives (tactical) can reduce volatility and enhance return over time. There has been 21 percent annual growth in liquid alternatives (mutual funds and ETFs) since 2005, with many investment instruments now available to construct flexible, tactical portfolios. A good place to start is with our White Paper Understanding Tactical Investment Strategies.

This Conference helped advisors understand what the drivers of return are for a diversified portfolio. It was mentioned several times that clients don’t need to fully understand each strategy, but they need to know that their advisor understands the strategy.  As leaders in tactical investment strategies, we are pleased that advisors are increasingly looking for new and creative ways to mitigate risk while participating in market upsides.Peyton Manning

This morning Peyton Manning (right), Super Bowl Winning Quarterback and five time NFL MVP, spoke on defining success through leadership and strategy. Throughout his presentation, he masterfully weaved analogies between the investment industry and the NFL. He focused on the game-changers, emphasizing that each change creates an opportunity to adjust and move forward.
He also emphasized the importance of having a coach to help you keep growing.  This way of thinking is summarized in the following quotes from Peyton:
As soon as you stop wanting to be coached, taught, or mentored, you’re in trouble. In describing his move to the Denver Broncos after his neck surgery, he said he had to find a new way move the chains down the field. Likewise, with the ever-changing markets, an advisor must adapt and make adjustments for clients.
Thanks to our host,Envestnet, advisors will enthusiastically leave this conference equipped with the latest strategies and ideas to better serve their clients. – Michael Sciortino

CMG at Envestnet Advisor Summit 2014

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Evestnet Advisor Summit 2014Busy day for CMG Capital Management Group at the Envestnet Advisor Summit 2014 exploring The Next Big Idea.

If you’re at the Summit be sure to stop by Booth #4 for your free copy of the CMG White Paper Understanding Tactical Investment Strategies – our big idea for a diversified portfolio in today’s environment.
Follow CMG on Twitter: @askcmg | Follow the Envestnet Advisor Summit: #AdvisorSummit14 | CMG Tactical Investing LinkedIn Showcase Page

CMG Shaping Behavior at NAPFA Conference

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napfaAre you looking to simplify your practice? Would you like to spend less time focusing on when to buy and sell and more time focusing on your client’s needs and goals? Do you find that investor behavior can often play a role in a portfolio’s lack of success?

If you answered yes to any of these questions, CMG Capital Management Group can help you.

Come visit us at booth 612 at the 2014 NAPFA National Spring Conference. Mention “Tactical Investing” and get a free copy of our White Paper, Understanding Tactical Investment Strategies.

This year’s conference theme, Shaping Behavior, speaks to the industry focus on investor behavior.

Investors have a lot at stake. It only makes sense that they tend to hit the panic button on an investment at the wrong time or buy into the markets just before a decline. This is where CMG’s expertise comes in.

Our approach focuses on tactical investing strategies structured to enhance returns and mitigate risk in a portfolio. We offer strategies with definitive processes that make those difficult buy and sell decisions for the investor. We understand the obstacles that you and your clients face every day and we want to talk to you about them.

We look forward to furthering the conversation this week in Salt Lake City as the 2014 NAPFA Spring Conference continues!

Follow CMG on Twitter: @askcmg | Follow the NAPFA Spring National Conference at #NAPFA14 | CMG Tactical Investing LinkedIn Showcase Page

CMG at NAPFA Spring National Conference

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Will you be at the NAPFA Spring National Conference, May 14-16. Salt Lake City, Utah? Come see CMG Capital Management Group at Booth #612 for a free copy of our new White Paper Understanding Tactical Investment Strategies.

We welcome this year’s Conference theme: Shaping Behavior: Clients, Advisors and Markets. We are leaders in tactical investing strategies that are structured to participate in upside market potential with a hedge against downside risk.

These days clients are concerned that the market may be over heated. They want to knows that their advisor has a strategy in place to protect against a precipitous market slide. Talk to us about market behavior and how to construct diversified portfolios that your clients can appreciate.

Follow CMG on Twitter: @askcmg | Follow the NAPFA Spring National Conference at #NAPFA14 | CMG Tactical Investing LinkedIn Showcase Page

Created exclusively for Fee-Only planners, this event offers a premier networking and continuing education experience for the top financial planners in the profession. Hundreds of advisors will convene over 2 ½ days to explore behaviors and biases that influence clients, markets and themselves; exchange ideas and best practices with their peers; and engage with the profession’s top leaders and visionaries. It’s an event that no Fee-Only planner – NAPFA member or not – can afford to miss.

CMG Gets Tactical at Envestnet Advisor Summit

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What’s the next Big Idea?

Evestnet Advisor Summit 2014Join CMG Capital Management Group at the Envestnet Advisor Summit at the Chicago Hilton, Wednesday, May 14 – Friday, May 16.

This year’s summit is about The Next Big Idea – the concepts that are becoming a reality in reshaping the financial services industry. This three day event will not only help you keep pace with a changing world but also help you show leadership to your clients.

If you’re at the Summit be sure to stop by Booth #4 for your free copy of the CMG White Paper Understanding Tactical Investment Strategies – our big idea for a diversified portfolio in today’s environment.

Meet the author of the White Paper, Steve Blumenthal. He’ll be at Booth #4 all day Thursday, May 15, and on the morning of Friday, May 16. What is tactical investing and why is it critical in constructing diversified portfolios for clients? Ask for Steve or someone at the CMG Booth if you’re at the Envestnet Summit in Chicago.  Or follow the Conference and sign up for updates here at CMG Advisor Central.

Follow CMG on Twitter: @askcmg | Follow the Envestnet Advisor Summit: #AdvisorSummit14 | CMG Tactical Investing LinkedIn Showcase Page

What do You Think?

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Michael F. Sciortino, Sr. Executive Vice President, Managing Director, Head of Distribution, CMG Capital Management Group

Michael F. Sciortino, Sr.
Executive VP, Managing Director, Head of Distribution
CMG

You’ve probably heard the saying, “it’s all in how you think about a situation.” That mindset plays such an important role in success. Here are a few great examples of the power of the right mindset:

“We take hamburgers more seriously than anyone else.” – Ray Kroc, founder of McDonald’s

“Champions take responsibility. When the ball is coming over the net, you can be sure I want the ball.” – Billie Jean King

“You must do the thing you think you cannot do.” – Eleanor Roosevelt

Yes, the caliber of information that we daily and consistently and repeatedly put into our brain is what actually programs our mind where to FOCUS.

Programming your thinking is vital. Why? Because what you think precedes every action. Your Brainmindset must literally be seeded every day with inspiring and uplifting thoughts.

How can we do this?

1) Wake up earlier. It’s really not as bad as you think. Allow yourself some quiet time to read something that will inspire you.

2) Script your day as if it has already happened. Yes, I know sometimes distractions occur but you will certainly accomplish more that day if it is well planned. Walt Disney was famous for this. He called it a script that your mind can follow. The body and your daily actions follow your mind.

3) Listen to morning motivational music or life enriching CDs on your drive to work.

Steve Jobs, the founder of Apple, did one thing every morning to keep him on track and focused. In his commencement address at Stanford University, he revealed that he looked in the mirror every single morning and he asked himself this very important question.

” If I died tonight, will I be glad that I did what I am planning to do today?”

Q: What’s your answer?

By the way, if the answer is no, then maybe you should consider changing the plan! – Mike Sciortino