Our Thoughts on a Strategy that Tries to Weather Every Season

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Published by Debra TaylorCPA/PFS, CDFA, JD | May 16, 2016

I have always said that I try to invest alongside my clients, as I would never recommend a strategy that I don’t believe in. At Taylor Financial Group, we also try to explain, as best as we can, why certain strategies make sense for our clients.  In this instance, we are discussing Swan Defined Risk, a newer addition to the portfolios that uses hedges that seek to protect investor capital and even out returns.  So when Swan Defined Risk was recently covered in Barron’s, it provides another opportunity for us to more fully explain our thought process (click HERE to read the Barron’s article).

Swan Defined Risk tries to eliminate the risk of major losses in a bear market, while simultaneously trying to earn gains in a bull market—which is basically the investment equivalent of having your cake and eating it too! For example, in 2008 investors lost only 4.5% compared to the 37% decline for the S&P 500 and a 22% decline for the 60/40 benchmark.  Then, during the 2009 market revival, Swan finished the year up 25%, benefiting from the return of stocks (without the prior year’s pitfalls) while the S&P 500 was up 26.5%. and the 60/40 benchmark was up 18.4%.  Moreover, this 19-year-old strategy is not only good for bear markets, as it has returned about 8.5% per year since its inception in 1997 (regardless of market conditions) while the S&P 500 averaged 6.57%.  For clients concerned about risk, yet still desirous of potential gains (or clients who are looking for an entry point to the market), Swan Defined Risk is an option to consider because it seeks to reduce risk, while still creating opportunity for growth.  Feel free to contact our office with any questions that you may have.

Throughout the last 19 years, Swan Global has grown to manage more than $2.5 billion, and the word is clearly getting out now that Barron’s profiled them. The Swan Defined Risk Strategy is definitely worth considering for the risk-sensitive investor.

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