Chairman, Chief Investment Officer, and Co-Founder of Good Harbor, Neil Peplinski, aptly describes the Good Harbor Tactical Core US strategy using a short quote: “Investing in the stock market is important for long-term success…but so is capital preservation during times of market stress.”
Such is the goal of the Tactical Core US strategy. It seeks to capture most of the market’s good times, while missing most of the bad times1—giving equity investors a better risk-reward relationship with a focus on downside protection.2
Tactical money manager Good Harbor understands that when “buy-and-hold” strategies result in significant losses, it can take some time for an investor to recover.2 In order to try and address that issue, Good Harbor seeks to limit down days in the market in hopes of improving real return. Research provided by Good Harbor demonstrates the value of avoiding market declines: between January 1981 and December 2002, an investor that missed the ten “worst days” would have improved their annual return by almost 40%.1
For investors looking to allocate a portion of their portfolio to a tactical strategy designed to outperform “buy-and-hold” strategies by avoiding market downturns, the Good Harbor Tactical Core US could be a strategy to consider.
The Tactical Core US Investment Approach and Strategy
The Tactical Core US seeks to systematically and actively move assets to the equity markets during bull markets, while moving assets to US Treasuries during sustained bear markets.
With a particular emphasis on downside protection, Good Harbor’s tactical approach of shifting into US Treasuries during periods of increased probability of equity market decline has been shown to improve total return and improve capital preservation, while having relatively low opportunity costs in the event of an unexpected equity market rally.2
How Does the Good Harbor Tactical Core Strategy Work?
Good Harbor uses a proprietary model to measure what they refer to as the “risk premium” of the market. As the risk premium rises, Good Harbor expects prices to fall, and vice versa. Good Harbor assesses the risk premium, and then uses that information to make asset allocation decisions of what percentage of stocks and bonds they have in the portfolio.2
Once asset allocation decisions are made, Good Harbor will invest in vehicles (like ETFs) designed to track the returns of indexes like the S&P 500, S&P 400, Russell 2000, Barclays Capital US 1-3 Year Treasury Bond, Barclays Capital US 3-7 Year Treasury Bond, and Barclays Capital US 7-10 Year Treasury Bond. There is no restriction for the strategy to have minimum exposure to either stocks or bonds, though the strategy is restricted from taking short positions on any exchange traded funds.3
To Note: The Good Harbor Tactical Core is a Long-Only Strategy, and there may be times when investments in leveraged products are held in the portfolio.2 The Tactical Core US process involves re-balancing composite assets to the model portfolio monthly.
Good Harbor Tactical Core US: Should You Invest?
While any investment strategy can experience a decline in value, investors looking for a tactical strategy should consider the Good Harbor U.S. Tactical Core portfolio. An investor should consider their long-term objectives and risk tolerance, before deciding to invest in any strategy.
Additionally, there are other strategies besides those offered by Good Harbor that seek to reduce the impact of prolonged market declines, so investors should consider exploring other options with the help of a financial advisor before selecting the Good Harbor Tactical Core US.
To learn more about Good Harbor call one of our Wealth Managers today at 1-800-541-7774, or click here to request more information.
Sources
3 PSN Enterprise / Informa Investment Solutions
Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional.
