The Inside-Scoop on USA Financial for 2018 (and Beyond)

Here’s the Skinny…

For your curiosity and in the spirit of transparency, I just shared a recent announcement, “The Inside-Scoop on USA Financial for 2018 (and Beyond),” that was sent to all of our affiliated advisors. It’s a bit of a state-of-the-company address that I do each year:

“Long ago, economic security was simply a function of a company’s SIZE and AGE, whereas now economic security is a function of a firm’s continued GROWTH and AGILITY.

The quote above is something I originally said a few years back, but have restated to our team and others numerous times since. Ironically, even though we strategize as a growing, agile organization, I’m proud that we can lay-claim to achieving high-grades in each of those four categories:

  1. SIZE – Our overall custody is over $3.5 billion with three-quarters of a billion in annual sales.
  2. AGE – This year, we will celebrate our 30th year in business.
  3. GROWTH – In 2017, we were named to the Inc. 5000 list for the fourth year in a row. This is an annual list of the fastest-growing private companies in the United States.
  4. AGILITY – Early 2017 “took-off” with USA Financial Exchange making a splash as a turnkey asset management program (TAMP) with industry leading features. USA Financial Securities then “officially became more RIA than BD,” as fee revenues surpassed commission revenues for the first time. Finally, at the end of 2017, we quietly launched USA Financial Consulting in response to and in support of IARs, Hybrid RIAs, and Stand-Alone RIAs assessing and implementing compliance, transition, and registration opportunities.

I go in to more detail in the full announcement that can be accessed here: “The Inside-Scoop on USA Financial for 2018 (and Beyond).”


That’s the Skinny,

How Just 20 People Can Redefine Your Practice

Here’s the Skinny,

Can you name the 20 most influential and important people in your practice right now?

I’m not referring to your 20 largest clients (although many could not list them either).  Some may be in your largest client grouping, but others may not even be customers of your firm – while you let that sink in, I’ll tell you a story about one of the influencers of USA Financial.

We started a partnership with this company in 2005. Over the years we have gotten to know each other better as business partners and have grown relationships with key individuals within each of our firms. This past year, they started introducing us to several wonderful potential clients. Now, this isn’t something we asked for, it’s not part of our business agreement and they aren’t directly compensated for sending someone our way. So why send us referrals? Because they know our business and trust us enough to stake their reputation on the experience someone will have when interacting with USA Financial. It’s easily the best compliment to receive and you can bet that they are included in our firm’s top 20.

Investing in these people, hyper-focusing the majority of your time resources and energy, can be like adding fertilizer to a perennial chunk of fertile soil capable of generating bumper crop after bumper crop if just given a bit of tender loving care.

I dive into greater detail on this topic and the secrets of these 20 influencers HERE (free 6 ½ minute video: Top 20 Mavens).

For those of you already affiliated with USA Financial, you can find this video on the dashboard in the Coaching and Consulting section (video # 18).

That’s the Skinny,


A New Stock Market Era has Begun (actually its already 5 years old)… Yet Almost Everyone Missed It

Here’s the Skinny,

The popular 1st Quarter 2018 USA Financial Trending Report has been released along with the January 2018 USA Financial Trend Tracker.

Here’s an except from the report…

On January 4, 2018, the Dow Jones Industrial Average (DJIA) closed above 25,000. Just eight trading days later, on January 17, 2018, the DJIA closed above 26,000, sprinting through the fastest 1000-point growth milestone ever. Many may remember years ago when I first introduced the stark visual differences of “your father’s stock market” (1980-1999) in contrast to “your stock market” (2000-2012).

The visual distinction for the S&P 500 for the 20 years of 1980-1999 compared to the 13 years of 2000-2012 is shocking. In fact, in my opinion, it changed everything. It ushered in the age of risk-management as king, unseating passive buy and hold investing as the logical approach. However, we are now dealing with a whole new era that began in 2013. (Note: I consider 2012/13 as the transition point for the next era, as 2013 was the year the market surpassed its previous highs, finally recapturing gains from both 2000 and 2007).

Once again, we see a very distinct contrast from the previous era, even with the performance flatness from late 2014 to early 2016. If we string all three eras together on a single chart, you can quite literally see and feel the “tone” of the market change as we progress through time (the RED vertical lines separate the eras).


Continue reading the 1st Quarter 2018 USA Financial Trending Report.

See the most recent  trending updates and the accompanying explanatory video.  

That’s the Skinny,

Year-End + Sweeping Tax Changes = Donor-Advised Funds Surge

Here’s the Skinny…

It’s tough to beat the simplicity, convenience and benefit of a donor-advised fund – and as you may already know, USA Financial Portformulas enjoys a money management relationship with the National Christian Foundation in order to make things even easier for you and your clients. Other options include Fidelity, Schwab, Vanguard, etc.

If your clients already have a donor-advised fund, it’s time to get those year-end tax-planning contributions submitted. If not, you still have time so set up accounts before year-end, but you better hurry.

Simply put, a donor-advised fund allows an investor/donor to make a contribution today, getting the deduction immediately, even though they may not grant the money to a charity (of their choice) until some entirely flexible future date (instantaneously and/or years from now). Really, it’s that easy. Plus, you can use it as a repository to collect and consolidate 100% of your charitable donations in one convenient reporting mechanism (which is a side benefit I love).

Here are three timely resources providing additional information:

Click below for the National Christian Foundation.



Click below for USA Financial Portformulas.

Click below for an Investment News article titled, “Interest in donor-advised funds surges in response to tax changes.”



The clock is ticking. Don’t let 2017 slip away before locking in your year-end contributions and tax deductions.

Merry Christmas & Happy New Year!

That’s the Skinny,

DOL Rule Delay – What to Believe & NOT Believe!?!

Image result for department of labor logo

Here’s the Skinny…

Many a false preacher exists when it comes to explaining the DOL Fiduciary Rule delay and its latest requirements. Depending upon the information source (and their economic interest), we’ve unfortunately seen vastly incorrect (and potentially dangerous) explanations being distributed as if they were factual.

Following and/or listening to (or running your business according to) such bad information as if it’s gospel could ultimately devastate you and your organization. It’s important you get it right as the delay is now extended until July 1, 2019 … meaning, you must operate accordingly and by the rules between now and then.

Click here for two complimentary documents:

You can count on the accuracy of these resources as they’ve been prepped and reviewed by attorneys working in the securities and asset management world.


That’s the Skinny,


Living a Worry-Free Life thru Growth & Risk

Here’s the Skinny (sharing with you what I send & mentor to my adult kids)…

NOTE:  Words in italic are from a Seth Godin post – the rest I specifically tweaked for my kids’ consumption.

Two kinds of practice

The first is quite common. Learn to play the notes as written. Move asymptotically toward perfection. Practice your technique and your process to get yourself ever more skilled at doing it (whatever ‘it’ is) to spec. This is the practice of skiing the grand slalom, of arithmetic, of learning your lines in a play, memorizing information, etc.

Once you’ve built a basic foundation of knowledge (see above), the other kind of practice is more valuable but far more rare. This is the practice of failure. Of trying on one point of view after another until you find one that works. Of creating original work that doesn’t succeed until it does. Of writing, oration and higher-level math in search of an elusive outcome, even a truth, one that might not even be there. Being bold. Being you.

We become original through practice.

We’ve seduced ourselves into believing that every breakthrough springs to life fully formed. What always happens (as you can discover by looking at the early work of anyone you admire), is that she practiced her way into it.

Image result for quality life pics

Everyone always asks me (even Mom), how I can be so comfortable taking risks without fret and worry.  There are two answers to that:

  1. I strive to do my best via (what I always refer to as) faith, honor, effort & intent.  If I’ve done my best in these four areas, then there is nothing more I can do.  The rest is up to God. My fret or worry is then simply unproductive and damaging to myself and others around me. (If I do not give my best effort, that and only that, is what creates my fret and worry.)
  2. What most people misunderstand is that taking an educated-risk is far less-risky then taking no risk at all. The ONLY constant is change. And change can only be won through risk.


That’s the Skinny,

Trust Company of America – Exciting Acquisition

Here’s the Skinny…

Last week we learned some good news for both USA Financial Portformulas and USA Financial Exchange – Our custodian, Trust Company of America (TCA), has signed a definitive agreement to be acquired by E*TRADE Financial Corporation.

We view this as a positive development as we believe the resources of E*TRADE will allow TCA to invest more in its innovative technology, valuable platform and in the top-notch service. Subject to regulatory approvals, we expect the transaction will close by the end of the second quarter of 2018.

We want to highlight some TCA features that will not change as a result of this transaction:

  • TCA will be run as a standalone entity and the TCA brand will remain unchanged.
  • The TCA leadership team will remain in place and will be able to continue to make decisions that are in the best long-term interests of your clients and your business.
  • TCA will continue to be non-competitive. You should not expect your accounts to be directly contacted by TCA or E*TRADE selling any products or services as a result of the acquisition.
  • TCA statements, tax forms, the client portal will remain the same.
  • TCA’s fee structure will not change.

E*TRADE is committed to ensuring TCA has the people, systems, and technology it needs to solidify its status as an industry leader. Like TCA, E*TRADE is a leader in technology, and both organizations will benefit from its combined technological resources and experience. Over time, TCA will be designated as an E*TRADE company in its branding so you will be able to benefit from E*TRADE’s national brand recognition.

We expect this change to ultimately enhance the benefit and value you already experience in dealing with USA Financial Exchange and/or USA Financial Portformulas as we continue to partner with TCA.  No doubt we will be in touch with more information as second quarter 2018 arrives.

That’s the Skinny,




Mike Walters, CEO




Risk Managed Accounts May Subdue Sequence of Returns Risk (Part II)

As a follow up to the previous post: Here’s the skinny

Risk Managed Accounts May Subdue Sequence of Returns Risk (Part II)

Risk managed accounts are my first line of attack (my second will be discussed in Part III) against the sequence of returns risk for investors withdrawing retirement income from their accounts.

In Part I, we analyzed a scenario in which investors had a nest egg of $1,000,000 and were attempting to take annual withdrawals beginning at $60,000 and increasing each year by 3% adjusting for inflation.  The problem was, depending upon the sequence of their returns, (1) one ran out of money, (2) another had a declining balance, and (3) the third maintained their $1,000,000 nest egg after withdrawals.  Mathematically these are all accurate and true.  That’s the unusual challenge with sequence of returns risk – it depends on the luck of the draw.

So, do we just throw up our arms and pray the sequence of returns works in our favor?  Of course not.

The looming retirement planning question is “How may we prepare in real life?”  Can we do anything to combat this risk besides simply withdrawing less money?  Well, let’s address the ultimate stress-test…  Let’s hypothetically look at what would have occurred to investors in the midst of the 2008-09 financial crisis.

We will compare and contrast relevant numerics for the S&P 500 Index alongside a risk managed account from USA Financial Portformulas, using the Sector Bull-Bear Strategy.

Here’s what performance and accumulation look like if we simply assume that both the S&P 500 and the Sector Bull-Bear Strategy have $1,000,000 invested and are allowed to accumulate with no withdrawals from 2004 through 2016:

Sector Bull Bear

I’ll attach a PDF brochure for the Sector Bull-Bear Strategy if you would like to know more details specifically about how the model functions.  Suffice it to say here, the Sector Bull-Bear is a formulaic trending risk managed model that uses specific criteria to select amongst 11 sector ETFs for the S&P 500 via “sector trigger scores,” but then also calculates an overall “master sector trigger” to formulaically dictate when the model will shift entirely out of equities to a conservative bond/gold ETF blend.

The chart above illustrates the S&P 500 (the GREY line) versus the net fee performance of the Sector Bull-Bear (the BLUE line) from the beginning of 2004 through 2016.  Take particular note of how the Sector Bull-Bear would have responded during the 2008-09 financial crisis by automatically shifting out of equities – revealing the popularity of using risk management.

But remember, we are discussing the perils of the sequence of returns risk and the difficulties it creates when distributing retirement income withdrawals from a portfolio.

So next, we will extract withdrawals just as we discussed in Part I of this write-up.

In the chart below, we will use the identical investment of $1,000,000 and identical performance from the chart above.  However, now we will assume that the investor begins to immediately withdraw $60,000 per year, via monthly income checks, increasing each year by 3% to adjust for inflation.

Sector Bull Bear 2.png

In this chart, the GREY line still represents the S&P 500 with ZERO withdrawals, just so you have a point of reference.  But our real focus is now on the green and orange lines.  The GREEN line represents the S&P 500 less the withdrawals (again, beginning withdrawals at $60,000/year paid monthly and increasing 3% annually for inflation).  Notice the severity of the decline during the 2008-09 financial crisis and the fact that by 2016 the GREEN line is running consistently below the initial investment of $1,000,000.

The ORANGE line represents the Sector Bull-Bear less the same withdrawals (again, beginning withdrawals at $60,000/year paid monthly and increasing 3% annually for inflation).  Once more, focus your attention on the reaction of the ORANGE line during the 2008-09 financial crisis.  Also, follow the ORANGE line movement through 2016 as it remains significantly above the initial investment of $1,000,000 through the duration.  This is the value of using risk management to combat the sequence of returns risk!

Unfortunately, all I ever read about the “acceptable retirement withdrawal rate” and/or the “sequence of returns risk” is that one must reduce their retirement income.  It’s as if everyone forgot what investment planning was all about.  Risk management is why we exist!  Anyone can simply identify a 60/40 portfolio allocation and reduce income payments from 6% down to 3%; there’s no need for a financial advisor in a relationship based on that math.

But financial advisors exist to deliver value to their investors.  And risk management is one of the primary ways that such value may be delivered…  Especially to an investor in need of withdrawing retirement income.

That’s the Skinny,




Mike Walters, CEO




2017.09.14 sector-bull-bear-strategy

Risk Managed Accounts may subdue Sequence of Returns Risk (Part I)

Here’s the Skinny…

Risk Managed Accounts may subdue Sequence of Returns Risk (Part I)

For simplicity, I’m going to start this explanation with data published by BlackRock used to illustrate a basic understanding of sequence of returns risk.

Stated simply, during accumulation and/or savings years, sequence of returns has zero impact.  Meaning, if you start with a lumpsum, the order of identical annual returns (positive or negative) has no bearing on the end result.

However, the opposite is true during the distribution and/or retirement income years.  If you are making withdrawals and/or extracting income then the sequence of returns is crucial.  In fact, it can make or break your retirement.  Negative annual returns experienced early during one’s distribution years may spell disaster.

Assume the following:

Scenario 1: Accumulation or Savings Years

  • Three investors made the same initial hypothetical investment of $1,000,000 at age 40 with no additions or withdrawals.
  • All had an average annual return of 7% over 25 years. However, each experienced a different sequence of returns.
  • At age 65, all had the same portfolio value, although they had experienced different valuations along the way.

Scenario 2: Withdrawal or Distribution Years

  • Three investors made the same initial hypothetical investment of $1,000,000 upon retirement at age 65.
  • All had an average annual return of 7% over 25 years, which followed the same sequences as during the savings phase example.
  • All made withdrawals of $60,000 (6%), adjusted annually by 3% for inflation.
  • At age 90, all had different portfolio values after the same annual withdrawals.

Accumulation ReturnsAccumulation Withdrawals

Please refer to disclosures at bottom of post.

As you can see in scenario 1, the changing order for the annual returns has no impact on the end result.  All three investors finish with exactly the same end accumulation value.

On the other hand, scenario 2 illustrates why historically the generally accepted “safe” withdrawal rate has been considered 4%.  However, in current times as we’ve experienced significantly lower interest rates, the dot-com bubble and bear market of the early 2000’s, plus the 2008-09 financial crisis, many now contend that a 4% withdrawal rate is no longer safe – and that withdrawal rates should be dialed back to 3% or lower.

You see, this is not an exact science, as it depends on so many investment variations and factors.  In scenario 2 for example, a 6% withdrawal rate was assumed and Mr. White ran out of money, while Mr. Rush may be in trouble depending upon how much longer he lives and what his future annual returns may be, yet Mrs. Doe appears to be in good shape financially.


When such “acceptable” or “safe” withdrawal rates are researched and calculated they are done so assuming static traditional investment allocations.  Therefore, they assume, for example, that one simply must withstand and absorb declines from significant market downturns – yet the entire purpose of risk management is to mitigate downturns!  And if one can mitigate downturns, the impact on the research and income calculations is significant (more on that in Part II)

However, unfortunately, investors are generally taught that accumulating a certain sized nest egg will solve all their retirement woes.  But obviously, that is not the case.  It helps, don’t get me wrong, more is always better than less when accumulating toward retirement.  But scenario 2 shows very clearly that the accumulation amount isn’t the only important factor.

Yet most investors think that’s all there is to worry about – “I just need to save until I hit my magic number.”  Again, it’s not that simple.  Crafting a retirement income plan requires more knowledge, more sophistication, and different tools then does simply saving and accumulating toward retirement.

That’s the Skinny,

Mike Walters, CEO




Chart 1

Source: BlackRock. This graphic looks at the effect the sequence of returns can have on your portfolio value over a long period of time. Other factors that may affect the longevity of assets include the investment mix, taxes and expenses related to investing. This is a hypothetical illustration. This illustration assumes a hypothetical initial portfolio balance of $1,000,000 with no additions or withdrawals and the hypothetical sequence of returns noted in the table. These figures are for illustrative purposes only and do not represent any particular investment, nor do they reflect any investment fees, expenses or taxes.

Chart 2
Source: BlackRock. This graphic looks at the effect the sequence of returns can have on your portfolio value over a long period of time. Other factors that may affect the longevity of assets include the investment mix, taxes, expenses related to investing and the number of years of retirement funding (life expectancy). This is a hypothetical illustration. This illustration assumes a hypothetical initial portfolio balance of $1,000,000, annual withdrawals of $60,000 adjusted annually by 3% for inflation and the hypothetical sequence of returns noted in the table. These figures are for illustrative purposes only and do not represent any particular investment, nor do they reflect any investment fees, expenses or taxes. When you are withdrawing money from a portfolio, your results can be affected by the sequence of returns even when average return remains the same, due to the compounding effect on the annual account balances and annual withdrawals.

Predictions are Dangerous

Here’s the Skinny…  

Predictions are Dangerous  

As Yogi Berra famously stated, “It’s tough to make predictions, especially about the future.”

But since there are only three ways to invest successfully, far too many investors underestimate the difficulties and therefore (consciously or subconsciously) choose not to heed Yogi Berra’s wisdom.   

Buy when you shouldHold when you should. Sell when you should. 

Unfortunately, to make matters worse, many experts are all too happy leading investors astray, spouting off predictions as if they were fact, giving interviews, writing articles and publishing books loaded with poisonous advice and dangerous stock market outlooks. In fact, I saw Jim Rogers was back in the news promising the worst crash of our lifetime and his (he’s in his mid-70s). Luckily, Yahoo Finance ran an opposing article on June 13, 2017, titled, “Why Extreme Market Predictions Like Those From Jim Rogers Provide No Value”* along with a list documenting Rogers’ chicken-little string of dangerous and inaccurate predictions:  

2011:  100% Chance of Crisis, Worse Than 2008: Jim Rogers
2012:  Jim Rogers: It’s Going to Get Really “Bad After the Next Election”
2013:  Jim Rogers Warns: “You Better Run for the Hills!”
2014:  Jim Rogers – Sell Everything & Run for Your Lives
2015:  Jim Rogers: “We’re Overdue” for a Stock Market Crash
2016:  $68 TRILLION “BIBLICAL CRASH” Dead Ahead? Jim Rogers Issues DIRE WARNING
2017:  THE BOTTOM LINE: Legendary Investor Jim Rogers Expects the Worst Crash in Our Lifetime  

Jim Rogers seems like a nice-enough fella. He doesn’t strike me as a crook trying to lead people astray. But regardless of his intent, that does not make his predictions any more accurate.

As if that’s not enough, searching for such misleading books on Amazon can be almost comical. Well, only if it wasn’t so devastating to think about all the investors’ wealth, hard-earned dollars, and retirement dreams that have been squandered following so many compelling predictions that turned out dead wrong.

Imagine the financial ramifications from just three classically horrendous predictive books, all written by highly educated and respected authors, who I must imagine completely and wholeheartedly believed they were speaking truth to investors. 

Dow 36000

DOW 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market
by James K. Glassman and Kevin Hassett
Prediction = Bull Market
Reality = Bear Market

A very compelling title, yet in reality with hindsight being 20/20, this book could hardly be more wrong. Ironically, its 1999 copyright was just before the tech bubble burst in year 2000. By 2002 the DOW was trading well below 8,000. It wasn’t until 2006 that the Dow finally reclaimed its 1999 high watermark. In 2017, the Dow closed above 20,000 for the very first time – still 15,000 below Glassman and Hassett’s sky-high prediction 18 years later.


Different this time

Dow 30,000 by 2008: Why It’s Different This Time
by Robert Zuccaro, CFA
Prediction = Bull Market
Reality = Bear Market

Again, a promising title for investors looking forward to 2008, as the book was copyrighted five years earlier in 2003. But as we know, reality can strike deep as the financial crisis of 2008 ultimately sent the Dow plummeting below 8,000 again by early 2009. Not until 2013 did the Dow surpass its 2007 highpoint.  Again, it wasn’t until 10 years later, in 2017, that the Dow hit 20,000 – still 10,000 below the anti-crisis prediction 14 years later.

Great Crash ahead

The Great Crash Ahead: Strategies for a World Turned Upside Down
by Harry S. Dent with Rodney Johnson
Prediction = Bear Market
Reality = Bull Market

This somewhat spooky title is meant to strike fear, yet is only one in a string of similarly predictive books Dent has written. The introduction for this book (copyright 2011) states straight up, “The crisis is likely to be at its worst by early 2015, or by early 2016 at the latest, and only after stocks crash to between 3,300 and 5,600 on the Dow by the end of 2014, or 2015 at the latest.” But in real life the Dow ranged from the 15,000s to 18,000s in 2014 and 2015 – again keeping in mind that the Dow subsequently broke through 20,000 in 2017 – 15,000 above Dent’s dire prediction six years later.

So, if even these investment and economic experts can be so very, very wrong – while no doubt believing they were so very, very right – what in the world is the professional financial advisor or astute investor to do? How can one approach the remainder of 2017, and beyond, with any confidence in their individual portfolio selection?

I suggest you push outlooks and predictions aside and concentrate on risk management tools such as formulaic trending to help identify the current environment or status of the market and economy. Use existing data and quantitative reality to assist you in steering your investments, essentially calculating the ongoing odds in favor, or against, equities as we move through time. This way, you can adhere to logical rationale when adjusting your portfolio, based on real time monthly data – rather than rely upon random, often ill-fated, or misguided human emotion.

There is no system, no money manager, no investor, who can gauge the market with 100% accuracy. If anyone ever tells you otherwise, they are lying to you. But there are ways to manage the risk that will always be inherent in the stock market.

Therefore, I believe that risk management should automatically trigger among all three ways to invest successfully. And hopefully, you select a risk management tool with an acceptable degree of accuracy.

Buy when you should.       Hold when you should.      Sell when you should.

Before diving deep into formulaic trending risk management, let me quickly dispel one common misconception where long-term investors automatically think of themselves as buy-and-hold investors. By definition, it is accurate that a buy-and-hold investor must be a long-term investor. However, the opposite is not true. Meaning, by definition, a long-term investor is not required to be a buy-and-hold investor.

For example, I am definitively a long-term investor. But I adamantly refuse to be a buy-and-hold investor.

In other words, I do not wish to limit my options to just “Buy when you should” and then hold indefinitely. I prefer that my options trigger and adjust across all three. Therefore, although I am a long-term investor, I stretch beyond the boundaries of a buy-and-hold investor.

This is an important distinction that many take for granted. You see, even if an investor owns something as simple as a mutual fund, the fund manager is then buying, selling and holding within the fund on behalf of the investors. In the world of risk management, the process is similar, but to reuse a previous example, it simply “stretches beyond the boundaries” of a typical mutual fund. Whereas a mutual fund must be constrained by its category or subcategory, risk-managed accounts may jump across categories depending upon market and economic conditions.

In understanding risk management, especially using formulaic trending, a simple visual aid that is available is our publishing of our patented RAM® Score (Recession and Market Allocation Management) as correlated to various market indices.  Each month, as explanation to both advisors and investors, we share the RAM Score correlations for eight primary indexes. This scoring mechanism calculates seven sub-components related specifically to each market index and the economy, then using specific weighting, aggregates them as one so that zero becomes the scoring baseline. Similar to the concept of a “canary in a coalmine,” when an index has a positive monthly RAM Score, we believe it indicates the current environment is favorable for such equities (keep mining). If the score is negative, then we believe the environment has become unfavorable and one may wish to exit said equities (stop mining).

Keep in mind, this is not predictive nor is it market timing. It is trending. Meaning, it is specifically an analysis to identify and validate the current situation or state of affairs so that one may recognize the trend at hand and therefore invest accordingly.

As of June 2017, all eight of our primary indexes are reporting a positive RAM Score. This includes the S&P 500, S&P 100, DJIA, NASDAQ-100, NASDAQ Composite, Russell 2000, Russell 3000, and Russell 1000. So, if one were using the RAM Score tool to assist in their risk management within an investment strategy, the current status would indicate that one should (for now) continue to invest in the corresponding equities. However, it is important to understand that this is in no way predictive of the remainder of 2017 or beyond. It is also important to understand that the market may go down when RAM Score is positive and it may go up when RAM Score is negative, but overall, we believe RAM Score may be indicative of the greater trend at hand, and therefore useful in helping to guide investment choices accordingly.  

Below is a RAM Score Correlation visual for the S&P 500:

RAM Score chart

The RED valleys indicate when RAM Score is negative.
The GREEN mountains indicate when RAM Score is positive.
The TAN line indicates the traditional S&P 500 with no correlation to RAM Score.
The BLUE line indicates the S&P 500 correlated to RAM Score so that it allocates to cash when RAM Score is negative.

As one studies the graph above, it becomes easy to see that identifying what trend exists at any given point in time can become quite useful and valuable for an advisor or investor.

By redirecting investor focus away from predicting future outlooks for the market and economy and toward clarification of the current trend status that exists today – by default we may then eliminate the emotional toil that trips up so very many investors.

As we are fond of saying, Plan First, Invest Second®.

The real challenge may not be in the selection of an investment, but in the selection of the risk management style you wish to employ. Apply scrutiny to research how certain risk management approaches react under different environmental duress and situations. Scrutinize, locate and plan accordingly as you infuse the risk management tool into your portfolio management.  Then step back – remaining a long-term investor (but not necessarily a buy-and-hold investor) – and allow the risk management tool to implement, operate and adjust according to plan on your behalf.

The next time a well-meaning friend presents you a “predictive” financial book, just smile, nod appreciatively, and use it for kindling. Or, better yet, if they are a really good friend, tell them you employ risk management tools so that your emotions don’t run amuck and get in the way of your investing.

That’s the skinny,




Mike Walters, CEO