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Our strategy is based on growth at a reasonable price. We seek out managers of sound investment strategies
that consistently outperform the market without taking on additional risk. We use investment strategies that have been
used for years by the most successful investors.
The greatest investors of all-time like Warren Buffett and Benjamin Graham used fundamental analysis & deep research to
select investments, not momentum, derivatives and complex computer driven trading models, like many investors use today.
We do not use risky strategies that fall out of favor, no margin, no shorting, no leverage, no derivatives and no penny
stocks. Simple investment vehicles like individual stocks and no-load mutual funds are used so you understand what you are investing in.
Our tactical model sets up our stock, bond and cash allocation. The allocation model sets up our sector and asset class allocation.
Our stock and mutual fund rating systems tell us the best stocks and mutual funds to invest in. Our strategies are employed using
low-cost custodians to keep transaction costs low, no-load mutual funds and reasonable portfolio management fees. These low cost
strategies help improve performance.
PDM Investment Services has a pro-investor structure. We are independent and have an open architecture. We are not pressured
into pushing high cost investment products like loaded mutual funds and annuities. We do not invest in illiquid investment
vehicles like limited partnerships. We do not have limitations on which stocks and mutual funds we can purchase. Your
investments are held in your custodian account (discount broker) for transparency.
The only way to get rich is to use the best time-tested investment strategies and stick with them. There are no get-rich
schemes that work long-term. The strategies used in the technology bubble, housing bubble and mortgage-backed security
crisis ended badly.
The enhancements listed below help us outperform the market averages and other portfolio managers.
- Tactical Asset Allocation (Enhancement #1)
Our tactical model sets up our stock, bond and cash allocation and helps us be in the market at the
right time to control risk and avoid bear markets, not corrections. The allocation is active with rebalancing every 1 to 3 months.
- Strategic Asset Allocation (Enhancement #2)
Asset allocation determines the mix of asset classes and sectors used to create a portfolio to meet its specified
goals and risk level. The typical asset classes are large cap growth, large cap value, mid cap blend, small cap growth,
small cap value, international, sectors, bonds and cash.
Asset allocation is a systematic way of diversifying a portfolio and spreading investments among a variety of asset classes that are not
perfectly correlated with one another. The process produces consistent long-term returns if done properly by managing risk-reward
tradeoffs and re-balancing.
Asset Allocation is the most important tool used in portfolio design and management. In the average
portfolio, asset allocation contributes the largest contribution to performance, next is security selection and last is tactical asset allocation.
Most portfolio managers use a basic asset allocation model to allocate a portfolio. We actively manage the percent of assets in each
asset class based on our asset class rating model on a monthly basis. The allocation is active with rebalancing every 3 months.
- Sector Class Allocation (Enhancement #3)
Only invest in the strongest growth sectors. We actively manage the percent of assets in each sector class based on our
sector class rating model on a monthly basis. Our portfolios invest in high growth sectors like technology, healthcare,
financial, natural resources and Asia. Why invest in the S&P 500 and mutual funds that contain all sectors, including the slow growing ones.
All of these sectors outperformed the S&P 500 over the past eight years. Top performing sector mutual funds and stocks
are used for each sector to further enhance performance. In sector mutual funds, you get the best managers for each sector compared to one
manager that knows a little about each sector in a diversified fund.
- Enhanced Security Selection (Enhancement #4)
Enhanced security selection is used to select the best investments in each asset class. We invest in
mutual funds and stocks with high performance (alpha), consistent performance, high-risk adjusted returns (sharp ratio)
and the best strategies. Our stock and mutual fund rating systems tell us the best stocks and mutual funds to select
in each asset class. Stocks and mutual funds are selected based on deep research, not a star rating and last year’s
performance. Growth strategy, fundamentals, management, performance, performance consistency, risk, valuation,
sentiment and technical strength are considered when selecting stocks and mutual funds.
We look for growth companies with strong and consistent revenue and earnings growth, an expanding or steady pretax profit margin and a return-on-equity
that is steady or growing. Companies are purchased at a reasonable price and at a favorable reward-risk ratio. The
company growth story and its risks are the most important information used in stock selection in the long-run.
- Low Cost Platform (Enhancement #5)
Investing in low cost strategies using a discount broker as custodian, purchasing no-load mutual funds
with low transaction fees and paying reasonable portfolio management fees will drive higher performance.
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