Stock Investing

When applied to stocks in an index, the management of, and selection of, positions based on a relative strength process generally keeps you investing in sectors, and securities within those sectors, where the market demand is strong. it also helps avoid areas where demand and performance is weak. By investing in areas of strength within an index, an investor has a better chance at beating that index..  

Asset Class and Asset Allocation

Relative Strength can be applied to asset allocation as part of a tactical program for investing.  Tactical asset allocation based on Relative Strength differs from traditonal Strategic Asset Allocation in that it makes changes periodically as asset classes perform or underperform different asset classes.

What Relative Strength can do……

  1. When applied to asset classes it can identify and keep you in the best performing asset classes
  2. Using cash investments as a proxy, it can keep you from significant losses, like 2008
  3. Help keep your emotions in check and give you a process to follow to avoid bad decisions

What Relative Strength won’t do…….

  1. Absolutely avoid loss.  Until  reverting to low-beta asset classes, some losses are possible
  2. Most likely you won’t experience severe losses like the high beta asset classes in 2008
  3. Cause emotional panic since the system is fixed