Trend Following

two seasons in the same forest

What is Trend Following?

A successful trend following methodology that relies upon time-tested quantitative analysis combined with disciplined money management can be used very successfully when applied to certain asset classes. High-yield bond mutual funds have characteristics that allow more reliable, accurate and repeatable identification of price trends using a quantitative approach… creating the opportunity for capital gains and low drawdown. These characteristics include dampened day-to-day price changes, identifiable price trends, good statistical predictability and high dividend yields.

A Timely Investment Approach

Major market corrections do significant damage to the wealth of investors. Risk management via diversification has proven to be inadequate to protect against an avalanche of selling which causes almost all asset classes to correlate to the downside. Government market intervention via lowered real short term interest rates and asset purchases (“quantitative easing”) can help to shorten recovery periods. However, relying on a government bailout of financial asset prices may not be a prudent plan. This is especially true for those with known or potential spending needs that would require selling of investment assets. Selling during drawdown can result in permanent impairment of wealth.

Conservative investors, retirees, pensions and endowments could all benefit from the steady growth of investment value that comes from a viable absolute return approach. In the face of on-going market challenges and uncertainties, you may find a Trendhaven managed account to be a wise alternative to:

  • Traditional portfolios of stocks and/or bonds;
  • Passive stock, bond and balanced mutual funds;
  • Actively managed long-only accounts using mutual funds, ETFs or individual securities;
  • Hedge Fund investments;
  • Investments with high volatility and/or low returns.