Tactical Investing With Andrew Gogerty of Newfound Research

Published: May 23, 2016, 8:25 p.m.

b'In this episode of\\xa0Strategic Investor Radio, host Charley Wright talks with Andrew Gogerty of Boston-based Newfound Research. The firm was founded in 2008 and is known for its tactical investment models and the mutual funds that are based on them. Prior to joining Newfound, Mr. Gogerty spent a decade analyzing alternative investment strategies for Morningstar.
What exactly is meant by \\u201ctactical\\u201d investing? In Newfound\\u2019s case, the term refers to using\\xa0sector\\xa0momentum and\\xa0asset-class\\xa0volatility to inform investment decisions. The models are based on the premise that investors\\xa0always\\xa0care about capital preservation, no matter what their other investment objectives may be.
Newfound\\u2019s tactical models generally work across all asset classes and represent strategic \\u201ctilts\\u201d toward either better returns or more safety \\u2013 whatever suits the investor\\u2019s needs. The firm originally provided research and sub-advisory services, but in 2013 it built its own suite of strategies that are now available in both mutual funds and separately managed accounts (\\u201cSMAs\\u201d).
When asked were the optimal conditions for the Newfound models\\u2019 success, Gogerty cited\\xa0consistent trends, either up or down. The worst conditions for the strategies are when markets are choppy, with big swings up and down but no consistent pattern.
No investment strategy can be right 100% of the time, and that\\u2019s why Newfound\\xa0dollar-cost-averages\\xa0into and out of positions. According to Gogerty, every time the SP 500 has gone up or down 20%, the index has taken more than a year to complete the move \\u2013 thus, an incremental, dollar-cost-averaging approach to entering or exiting positions doesn\\u2019t present a great deal of timing risk.
When asked what keeps him up at night, Gogerty said people who \\u201cinvest walking backwards through time.\\u201d He drove home the point with a Yogi Berra quote: \\u201cThe future ain\\u2019t what it used to be.\\u201d Just because \\u201c60/40\\u201d worked in the past, doesn\\u2019t mean it will in the future.
Gogerty also cited Research Affiliates projections for ultra-low returns from the stock and bond markets over the next ten years, and added that the \\u201cFANG\\u201d stocks \\u2013 Facebook, Amazon, Netflix, and Google \\u2013 accounted for the vast majority of the SP 500\\u2019s gains in 2015.'