going against the grain the harvesting strategy strategy by timothy d. d’angelo investment...
TRANSCRIPT
Going against the GrainGoing against the Grain
The Harvesting StrategyThe Harvesting Strategy
Strategy byStrategy by
Timothy D. D’AngeloTimothy D. D’Angelo
Investment ConsultantInvestment Consultant
The Static Asset Allocation The Static Asset Allocation StrategyStrategy
What you hear about from the mediaWhat you hear about from the media The holding of stocks and bonds that match The holding of stocks and bonds that match
your risk toleranceyour risk tolerance The need to regularly rebalance your holdings The need to regularly rebalance your holdings
back to your original risk tolerance back to your original risk tolerance
The Harvesting StrategyThe Harvesting Strategy
How farmers manage their homesteadsHow farmers manage their homesteads Plant - Tend - Harvest - Plan - PlantPlant - Tend - Harvest - Plan - Plant
In the spring they plant their cropsIn the spring they plant their crops As the seasons move forward they tend to their cropsAs the seasons move forward they tend to their crops As fall gets closer they start to harvest portionsAs fall gets closer they start to harvest portions In the winter they plan on what crops to plantIn the winter they plan on what crops to plant
Where do they feel their best opportunities are going forwardWhere do they feel their best opportunities are going forward That’s where they plantThat’s where they plant
Static Asset AllocationStatic Asset Allocationvs.vs.
Harvesting StrategyHarvesting Strategy
When put side by side how do they differ?When put side by side how do they differ?
The DebateThe Debate: : When you rebalance - do you in fact When you rebalance - do you in fact
““Sell High to Buy Low”? Sell High to Buy Low”?
Static Asset Allocation Static Asset Allocation value of funds 1value of funds 1stst of year of year
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Static Asset Allocation Static Asset Allocation fund values end of year onefund values end of year one
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Static Asset Allocation Static Asset Allocation RebalanceRebalance
Sell High - Buy Low Sell High - Buy Low
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Static Asset Allocation Static Asset Allocation value of funds 1value of funds 1stst of year of year
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Static Asset AllocationStatic Asset Allocation fund values end of year onefund values end of year one
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Static Asset Allocation Static Asset Allocation RebalanceRebalance
““Sell High - Buy Low” ?Sell High - Buy Low” ?“Sell Higher - Buy High” ?“Sell Higher - Buy High” ?
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Static Asset Allocation Static Asset Allocation value of funds 1value of funds 1stst of year of year
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Static Asset Allocation Static Asset Allocation fund values end of year onefund values end of year one
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Static Asset Allocation Static Asset Allocation RebalanceRebalance
“Sell High - Buy Low” ?“Sell High - Buy Low” ?“Sell Low - Buy Lower” ?“Sell Low - Buy Lower” ?
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Harvesting StrategyHarvesting Strategyvalue of funds 1value of funds 1stst of year of year
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Harvesting StrategyHarvesting Strategy The safety bucket’s primary focus is stabilityThe safety bucket’s primary focus is stability
Its secondary focus is to keep pace with inflationIts secondary focus is to keep pace with inflation We always want to try and maintain our purchasing powerWe always want to try and maintain our purchasing power
All dividends and capital gains will be placed in the safety bucket All dividends and capital gains will be placed in the safety bucket This is why we start and finish with the graphs showing first of and end of This is why we start and finish with the graphs showing first of and end of
year year Capital gains are most frequently paid in DecemberCapital gains are most frequently paid in December
50% of all gains at end of year will be harvested50% of all gains at end of year will be harvested The ‘harvest’ indicator is ‘up 30%’The ‘harvest’ indicator is ‘up 30%’ The ‘plant’ indicator is ‘down 20%’The ‘plant’ indicator is ‘down 20%’ Recognizing any ‘harvest’ or ‘plant’ opportunity resets an Recognizing any ‘harvest’ or ‘plant’ opportunity resets an
indicatorindicator Taking into consideration all of the above will allow us to proceed Taking into consideration all of the above will allow us to proceed
with the harvesting strategy most proficientlywith the harvesting strategy most proficiently
Harvesting StrategyHarvesting Strategyvalue of funds 1value of funds 1stst of year of year
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Harvesting StrategyHarvesting Strategy fund values end of year onefund values end of year one
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Harvesting StrategyHarvesting StrategyHarvest 50% of Gain from Fund A - Sell HighHarvest 50% of Gain from Fund A - Sell High
Place Gain in Place Gain in Safety BucketSafety Bucket Plant 25% of Safety Bucket to Fund B - Buy Low Plant 25% of Safety Bucket to Fund B - Buy Low (down 20%)(down 20%)
**What the safety bucket offers us is the ability to What the safety bucket offers us is the ability to redeploy Gain when / if suitableredeploy Gain when / if suitable
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Harvesting StrategyHarvesting Strategyvalue of funds 1value of funds 1stst of year of year
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Harvesting StrategyHarvesting Strategy fund values end of year onefund values end of year one
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Harvesting StrategyHarvesting StrategyHarvest 50% of Gain from Funds A & B - Sell HighHarvest 50% of Gain from Funds A & B - Sell High
Place Gain in Place Gain in Safety BucketSafety Bucket **It’s OK for us to increase our safety bucket. This willIt’s OK for us to increase our safety bucket. This will
provide us with opportunity and choice going forward. provide us with opportunity and choice going forward.
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Harvesting StrategyHarvesting Strategyvalue of funds 1value of funds 1stst of year of year
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Harvesting StrategyHarvesting Strategyvalue of funds end of year onevalue of funds end of year one
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Harvesting StrategyHarvesting Strategy Fund A down 25% - Fund B down 20%Fund A down 25% - Fund B down 20%
Plant 50% of Safety Bucket - 25% to each FundPlant 50% of Safety Bucket - 25% to each Fund * * Again we have created the ability to redeploy gain when/if it is suitable. Again we have created the ability to redeploy gain when/if it is suitable. This is never a requirement. It comes down to what is most appropriate at This is never a requirement. It comes down to what is most appropriate at
any given time for you to achieve your goals!!any given time for you to achieve your goals!!
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Harvesting StrategyHarvesting Strategy
How farmers manage their homesteads: How farmers manage their homesteads: Plant - Tend - Harvest - Plan - Plant Plant - Tend - Harvest - Plan - Plant How prudent investors manage their portfolios : How prudent investors manage their portfolios : Buy - Monitor - Sell - Evaluate - Buy Buy - Monitor - Sell - Evaluate - Buy