We believe a portfolio of individual stocks chosen for value and performance can outperform index ETF portfolios. Tactical portfolios that use index ETFs to track the return of an asset class or market sector are essentially active indexing strategies, bound to perform no better than the market sectors they invest in.
Dividends have historically accounted for a significant portion of S&P 500 returns, even in bull markets. By investing only in stocks that meet our minimum dividend yield criteria, we seek to enhance the power of compounding on cumulative returns.
Lower Internal Expenses
By investing in individual stocks, we eliminate the layers of internal expenses embedded in portfolios of ETFs.
No Leverage or Shorting
We avoid the use of leverage and shorting, both which can create an unfavorable risk/reward profile and lead to significant underperformance, particularly when combined with frequent allocation shifts. Whipsaw is exaggerated by leverage.
Defense Focused on Sustained Declines
Only With the QRI intended to react only to large market declines rather than short-term pullbacks, we believe we can reduce the likelihood of the whipsaw effect that often results from more frequent allocation shifts.
Potential for Relative
Tax Efficiency We anticipate rare defensive shifts, allowing us to maintain our equity allocation over multi-year periods. This creates the opportunity for long-term capital gains if we hold a stock longer than one year. By contrast, frequent allocation shifts ensure short -term capital gains.