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The History Behind Trade Signals

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The History Behind Trade Signals:

I like to look at each investment made within a total portfolio as a unique risk.  In this regard, an individual investment strategy is one unique risk.  Hopefully, each risk selected and put into your portfolio will make money.  We know that is not always the case; thus, we diversify our set of risks that make up our portfolios.  Diversification is designed to achieve a certain return and risk profile.

From this perspective, I like to look at the forward return probabilities for equities and shape the various risks within my portfolio tied to probable equity market returns. Simply, when the market is attractively priced, overweight equities.  When expensively priced, underweight and hedge your equity exposure and overweight to alternative investment strategies (defined as anything other than traditional equity and bond market buy and hold) in your portfolios.

Given the expensively priced nature of the market today, I continue to favor the following mix: 30% equities (hedged), 30% fixed income (tactically managed) and 40% alternative and tactical investment strategies.  I believe something special happens when you combine several non-correlating strategies together.

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