With increased stock market volatility and historically low interest rates, traditional investment strategies fail to meet many investors' needs. Typical mixes of stocks and bonds (static asset allocations) and target-date funds have left many retirees and endowments with significant losses they can ill afford.
So if traditional investment strategies won't work for these investors, what will? After extended research, Crossroads has developed the Legacy Strategy to address current investment issues.
Our Legacy Strategy was developed in response to the growing need people and organizations had for stable account balances and good rates of return. Avoiding significant declines due to market fluctuation is especially critical for private foundations, endowments, and individuals in retirement—those who regularly make withdrawals from their accounts. The good returns and stability offered by our Legacy Strategy are essential to the longevity of this type of account.
HOW THE LEGACY STRATEGY WORKS
First, the Legacy Strategy only uses investment vehicles whose returns are more predictable during specific phases of the business cycle.
Second, we use an economic model that emphasizes the preservation of principal, but shifts the portfolio to investments that have greater return potential at times when the economic environment makes it safe to do so. We call this playing defense. Playing defense is critical to avoid significant losses due to market volatility, but when the policy environment is conducive to economic growth, we can generate higher returns by reallocating the portfolio to include higher yielding securities with minimal risk.
Third, when looking to increase returns and protect principal, we use investment vehicles that, if they decline, recover in a relatively short time. This allows the Legacy Strategy a back-stop of protection in case of declines which could be caused by influences such as geo-political events or natural disasters that may disrupt the value of certain securities in the portfolio.
The general stock market does not meet above listed criteria, but certain high yielding stocks, high yield bonds, high quality corporate bonds, and government guaranteed bonds do. The Legacy Strategy uses these criteria to provide higher returns and reduce the risk of large extended declines for those who need stable and productive investments.
For more information about our Legacy Strategy please contact Clint Biesinger with Crossroads Investment Advisors.