Stress Testing Your Portfolio

2007 was a landmark year as the 9th of October marked the peak of the stock market (Dow Jones). Crunchy leaves weren’t the only thing beginning to fall in October, though. This time also marked the beginning of a significant decline.

Backtrack a few years to 2001. Following 9/11, the U.S. stock market experienced a bull market from 2002-2007. Then in March 9th, 2009, the market bottomed out with the Dow down 54% since October 2007. Maybe people lost their jobs. Others lost their retirement savings.

Stress Testing For Declines

Understanding the past declines in the stock market can certainly help you temper expectations and stress test your portfolio. Stress testing is a method for exploring how your portfolio will perform during a financial crisis. This is widely used by the banking industry and finance professionals.

The banking, credit, and real estate industries were to blame in the 2008-2009 decline in the market, but there are measures that could have been taken to prevent a crash. Many analysts admit that the lack of proper asset allocation and stress testing contributed to bigger losses for individual portfolios.

Stress Testing With The Monte Carlo Simulation

The Monte Carlo Simulation (or Monte Carlo Method) is a popular simulation to stress test and guess certain outcomes in a portfolio, used in the finance industry. This method helps you see the possible outcomes of your decisions and assesses the impact of risk. In retirement, the Monte Carlo Simulation is valuable in determining the probability of running out of money, based on various asset allocations.

Let’s look at a stress test example for a retirement portfolio. When planning for retirement, the first step, although an obvious one, is to determine how much savings you’ll need to live comfortably in retirement. Most people don’t realize that the accumulated amount isn’t the important number, but rather the income it will generate in retirement.

Example Of Stress Testing Your Portfolio

As an example, an investor saves $1 million and plans to retire in five years. Let’s assume a 5 percent withdrawal rate at retirement, giving this investor $50,000 annually of income. Now let’s also project (or stress test) a 25 percent loss in the portfolio. The new accumulated asset will be $750,000, which will now generate $37,500 annually. This is a loss of more than $1,000 of retirement income every month! Utilizing a Monte Carlo Simulation or other method of stress testing, one could plan with possible ways to minimize loss and risk.

Perhaps if a simulation shows the portfolio increasing in a certain asset class, and reducing in another asset class, the portfolio may lose only 15 percent of value rather than the 25 percent previously suggested. This might be increasing or decreasing in a sector or industry, such as oil or real estate. Rather than a sector, it may be changing the allocation for equities, bonds, hedge funds, or options. We also utilize tactical managers in addition to our own internal approach.

Prepare With Stress Testing

There is no way to predict with certain what the stock market may do in the future, but through stress testing your portfolio with simulations you can certainly be prepared. We can show you a snapshot of your current portfolio and the probability of reaching your goals, therefore allowing you to make changes to improve your chances of success. You can call me direct at Axxcess Wealth Management at 858.217.5347 and we’d love to help you.  Click here to take a risk survey to see how financially prepared you are.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

Ever Wonder How Your Portfolio is Actually Doing? Please Meet the Axxcess Wealth New Client App

Axxcess Wealth Client App

With the Axxcess Wealth Client App, you can review your portfolio’s performance in great detail and always know where you stand. Track your progress and review your holdings like never before.

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You can download our custom app for iPhone, Android and Windows Phone devices free in your app store today. If you have any questions, feel free to contact us at 858.217.5347.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

Make the Future a Reality as an Innovative Investor

Self-driving cars, personal gene mapping, smart robots; these are all things of the future, things that our parents couldn’t even imagine when they were children. But now they are becoming a reality. Today’s visionaries are bringing the future into the present. Luckily for you, you don’t have to be a scientist or inventor to be a part of this movement.

As an investor, you can help fund and drive the innovation that is forever changing the world in which we live. You can be a part of the Genomic Revolution, Web x.0, and Industrial Innovation. You can help bring the entire world access to the cloud, make autonomous electric vehicles commonplace, and bring to market effective drugs for fighting terminal illnesses. You can make these life-changing innovations possible.  

Innovation is the key to growth, so by investing in innovative companies you also have great potential for financial returns. Our new “sharing economy” that we have today will increase the utilization of fixed assets, shrinking demand in some sectors while boosting total factor productivity and returns on investing capital.

Investors who understand how disruptive innovation affects the economy and the opportunities that it provides are a step ahead of the rest. They are the ones who will reap the greatest rewards from society’s advancements. And you can be one of them.

If you want to invest in the innovation that is shaping our modern world, we can help. At Axxcess Wealth Management, we have investments available to us that present the best risk-reward opportunities among companies that rely on or benefit from the development of new products or services, technological improvements, and advancements in scientific research. Call us today at 858.217.5347 to see how you can help lead the world through disruptive innovation.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

Human Genomics Investing: Where Healthcare Meets Technology

There is a revolution happening that will help you and others live longer, better lives. Your medical care will be more personalized, your medication more potent and precise, and we will finally be able to conquer world hunger. This is not a political or social revolution, but a scientific one.

The genomic revolution has begun and is picking up steam. Already, scientists can sequence the entire human genome, over 20,000 genes, in only a few days and at a cost of only $1,000. Medical care can get truly personal when doctors have access to an actual map of your genes. No longer will care be reactive, but rather proactive and preventive.

This genomic knowledge will also lead to better pharmaceutical developments. Drugs will become more powerful, precise, and profitable — something we will all benefit from.

Beyond just DNA, a greater understanding of proteins, RNA, microbiomes, and other molecules will impact diagnostics and treatments. Stem cells will play an instrumental role in pharmaceuticals and therapy. The genomic revolution is turning the medical world upside down.

Genomic sequencing goes beyond just humans, though. Bacteria, cancer, cantaloupes, and cats can all be sequenced to give us a better understanding of how life thrives, grows, and heals. Not only will human life be transformed in this revolution, but agriculture will as well. Genetically modified crops will become safer and more cost-efficient, bolstering the world’s food supply.

The genomic revolution is providing deeper biological insights and innovations that advance safety and efficacy across the board. The increasingly powerful analytics are eliminating guesswork in everything from genetics to crop planting. Genomic sequencing is revolutionizing the medical industry, and you can be a part of it.

You don’t have to be a scientist or medical doctor to join the revolution that is extending and enhancing the quality of human life. As an investor, you can play a major role as well. You can invest in companies that incorporate technological and scientific developments, improvements, and advancements in genomics into their business.

Not only will investing in human genomics put you on the forefront of a revolution, it can also be very profitable. According to research, genomic sequencing of DNA is expected to grow at a 200% annual growth rate. If you want to be a part of revolutionizing health care, agriculture, and pharmaceuticals through your investments, call us today at 858.217.5347.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

ARK Wins Two ETF.com Awards

As your advisor I am constantly researching ways to grow your money. You won’t see me hosting seminars or steak dinners. I started in the wealth management business from the portfolio management side, so I know how the sauce is made. I am always focused on ways to adapt and innovate for my clients. Former Michigan coach, Bo Schembechler, said it well: “Every day you either get better or you get worse. You never stay the same.”

Innovation is constant in our society and I wanted to add it to portfolios. I researched ways to add exposure to client accounts with this specific theme of innovation.  I came across a management team at www.arkinvest.com that was a perfect fit for what I wanted. Here I found a strategy I could add to client portfolios that was focused on today’s disruptive innovative technologies: robotics, automation, 3D printing, human genomics, Crypto Currency, and artificial intelligence to name a few.

I am proud to announce that the ARK Innovation ETF has been named ETF of the Year as well as being named the Most Innovative ETF Issuer of the Year at the fifth annual ETF.com Awards.

About ARK Innovation

ARK is an actively managed fund focused on capturing the performance of companies involved in “disruptive innovation.” The fund was up an astonishing 87% last year, partially due to it’s allocation to the Bitcoin Investment Trust and the “FANG” stocks, otherwise known as Facebook, Apple, Netflix, and Google/Alphabet. In fact, it was one of our top holdings at Axxcess this past year. The company is driven to capitalize on rapid change in our society and avoid industries and companies likely to be displaced by technological innovation.

If you want to learn more about ARK and its values and vision, check out the full article. If you have any questions about our investment strategy or about how we work to bring growth to your portfolio, contact our office today by calling 858.217.5347.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

Athena Global ETF- Feb 13 2018 Update

Athena Global Tactical ETFs Update

With recent market volatility, we have advisors and clients asking about potential position changes to our Global Tactical ETFs portfolio. Tactical managers use different approaches including economic conditions, momentum and valuation. These signals can be short, intermediate or long-term in nature. We use longer-term deep behavioral currents and don’t react to short-term market volatility or drawdowns. The portfolio will typically hold positions for 6-9 months.

We are currently long the S&P 500 and will maintain our position until we re-evaluate our data again in early March. Our market barometers are updated monthly and continue to have expected returns in the normal range of 10% annualized. While the portfolio can move 100% to cash, this usually occurs only in catastrophic scenarios where our barometers sustain dramatic deterioration over time. We rely on our methodology to take the emotions out of the process and this approach has served us well.

The table below provides some perspective on our current S&P 500 position as of 02/09/2018 versus the average of all portfolio positions since inception in September 2010. Our current drawdown is in-line with the average drawdown of our historical positions and that of our benchmark.

 

 

Portfolio performance is Net of Fees.  Portfolio and Benchmark Returns and Drawdowns are not annualized.
^ Benchmark is MSCI ACWI NR Index  View Full Portfolio Disclosures

The current economic, fundamental and behavioral indicators continue to remain solid.  Please reference our monthly Market View.   For suggestions on helping clients, please refer to our Behavioral Advisor Materials.  Sometimes it is just as important to not trade and stay invested through the volatility and drawdowns as it is to exit the market.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.

Dave Stock
(917) 771-1437
david.stock@athenainvest.com

Steve Bogosian
(314) 562-2223
steve.bogosian@athenainvest.com

Reflections on recent volatility

The technical details which appear to have created significant selling last week began in the options market after-hours on Friday, February 3rd and are quite extraordinary. For those who are interested in taking a deeper dive, simply Google “what happened to XIV” and you will learn quite a bit about trading volatility. Best we can tell, the unwinding of this particular trade played a significant role in taking what would have just been a bad day in the market to seeing equity indexes enter into “correction territory” – a 10% pullback from recent highs – in 4 days.

Corrections should be seen as a healthy resetting of valuations. They should also remind us to take a look at the risks inherent in any investment strategy – the risk of loss.
Over the past year, Axxcess has been working on the development of a new set of tools to help monitor portfolio risk. The development of these tools has allowed our Advisor’s to “stress test” portfolios against a variety of technical, policy-driven, and economic scenarios.
What is unique about these tools is how they illustrate the potential impact risks can have on both current portfolios and proposed strategies by using historical research and analysis on how economic indicators are correlated. The most important outcome is an understanding of each portfolios’ sensitivity to market movements and the potential sensitivity to loss. Measuring this becomes extremely useful when coupled with an understanding of your sensitivity to loss.
How do we do that? We have created a risk tolerance survey and incorporated a scoring methodology that evaluates your sensitivity to loss. Instead of outputting only a score, our methodology creates a measure of this risk in percentage terms. For example, a conservative investor score translates to a portfolio with a potential loss exposure of 10% or less.
We have highlighted trending scenarios here.
Risk Tolerance is required to be revisited with clients at least annually. A number of things can change your Risk Tolerance Score: job change, income, age, or changes in life circumstances such as the birth of a child, death, divorce, and/or sale or acquisition of a business or real estate, etc.  It is important to make sure that your investment risk tolerance matches your portfolio allocations when selecting your investments.
We have developed a secure, online form that will score and record your responses in lieu of sending out a paper questionnaire.

Looking Ahead

2018 has begun with strong economic growth. GDP as forecasted is expected to rise more 4% in the first quarter. More than 85% of companies in the S and P 500 beat earnings expectations. Wage growth increased 2.9% over the past year.  With corporate tax reform becoming law, the financial health of US businesses should continue to improve.
However, with strong future expectations, comes inflation. With inflation comes higher borrowing costs. Inflation has been benign for several years, and as we see new policy implemented,  both stock and bond markets will need to digest new data. In short, you should expect more volatility in 2018.  Historically the equity markets have been roughly twice as volatile as they were in 2017. Sudden spikes give the financial media a lot of material to focus on. Dealing with volatility can be unnerving at times, but it is a more normal behavior of markets.

3D Printing: The Future Of Manufacturing

Though it took several decades to really catch on, once factories switched from steam power to electrical power, the manufacturing world exploded. Productivity improved, wages improved, and the entire manufacturing landscape was changed for the better. Wouldn’t it have been awesome to have been an investor who got into electricity before everything boomed?

It’s too late to get in on the ground floor for electricity, but the same opportunity is presenting itself once more: 3D printing. 3D printing, also known as additive manufacturing, is simply the process of building objects layer-by-layer instead of using a mold or removing material from a larger block. This opens the door for radically new part architectures, decreased costs, reduced weight, and shorter time to production for manufacturers.

3D printing could completely revolutionize the manufacturing industry just as electricity did a century ago. With the constant pressure to cut cost and gain efficiencies, this is the answer they are looking for. It can drastically cut cost while enhancing accuracy, speed, and customization. As printer capabilities and materials improve and innovation continues, more and more companies will recognize the possibilities and begin to use it.

The long-term growth potential is enormous, and we’ve already seen the beginning. The 3D printing sector took 20 years to reach a market value of $1 billion. It took only five years to double that and reach $2 billion. Analysts believe that in the next ten years 3D printing will grow 400%.

If you want to get in on the ground floor of 3D printing, it’s not too late. Though things are starting to pick up, as with most disruptive technologies it takes time. We are in the adjustment period when it has not yet been widely adopted, so there is still amazing growth opportunity for investors.

As an investment manager, I look beyond the S&P 500 to bring my clients truly unique opportunities. 3D printing is one of them. The possibilities for investment in the 3D printing sector excite me and I’m eager to bring them to my clients. If you want to get in on an innovative technology that could change the world, call me at 858.217.5347 for a complimentary consultation where we can discuss how 3D printing would fit into your portfolio.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

What I Do and How I Can Help

For most people, it’s hard to find the time and resources to build and manage their assets confidently. It can be even harder to know how to integrate your family’s values and wealth management goals into your portfolio and financial strategies and stay on track for the long-term.

With more than 12 years of experience as a portfolio manager and financial advisor, I aim to use my knowledge and experience to help my clients protect what they’ve worked for, pursue their ideal retirement, and leave the legacy they envision for their heirs.

I strive to serve as a trusted advisor with whom people feel at ease talking about their financial concerns and retirement dreams. Along with instilling a sense of confidence, my goal is to provide them a comprehensive strategy that incorporates their objectives and outlines how they can transition from where they are today to where they want to be in the future.

What I Do

Axxcess Wealth Management is an independent firm serving as a strategic advisor to business owners, family offices, and high net worth investors. Our firm’s philosophy is to integrate third-party investment managers alongside real estate, private equity, and hedged investments to create a unique open investment platform.

As an independent firm, I have the ability to provide a comprehensive range of wealth management services. And with our open architecture Axxcess Platform, I can bring the latest in financial technology to my clients, along with offering access to top-tier managers, low-cost ETFs, and forward-thinking investable themes in disruptive innovation.

One of the unique elements is the investment opportunities on which I focus. As a member of the Axxcess Wealth Management Investment Oversight Committee, I’m responsible for monitoring current investments and spearheading client investment in robotics, automation, and artificial intelligence. I seek to do things differently, focusing on managing money innovatively by searching for unique investment opportunities, such as funds that invest in human genome sequencing, robotics, 3D printing and other advancements within science and technology. By evaluating innovative investment opportunities, I hope clients can feel more excited about their portfolios and future financial plans.

Who I Serve

While I work with a diverse range of clients, a majority of them are affluent families, working professionals, high net worth investors, and business owners. After working hard to build their wealth, they want to grow and preserve their wealth throughout life as they prepare for retirement and determine the legacy they seek to leave.

By providing comprehensive services and maintaining a high-touch and personalized experience, I seek to serve as my clients’ most trusted financial consultant and help them make smart decisions with their money and work toward their personal definition of financial independence. Beyond the higher level of knowledge they gain, I believe clients choose to work with me because of the strong relationship I aim to build with them and the highly customized approach I take with their wealth management needs.

My Goal for You

Through a hands-on approach and dynamic process, I hope my clients gain an awareness of how improved portfolio performance through reduced portfolio risk, elimination of asset class bias, and significant cost savings benefits the sustainability of their wealth.

Whether you are looking for a tactical strategy that can help your portfolio dynamically adjust to changing market conditions or an equity income strategy that can deliver a fixed income approach to equity investing, I can construct, implement, and monitor a customized solution for you. If you’re interested in learning more about how I may be able to help you, contact me for a complimentary consultation by calling 858.217.5347.

About Kevin

Kevin Manzo is a Financial Advisor with Axxcess Wealth Management. Kevin’s services are especially valuable to business owners, high-income and high-net-worth professionals and their families. After 12 successful years as a portfolio manager and advisor Kevin has the knowledge and experience to help clients protect what they’ve worked for, enjoy a comfortable retirement, and leave the legacy they choose for their heirs. Along with his Bachelor’s of Business Administration degree in Finance from Chapman University, he also holds the Accredited Investment Fiduciary® credential, signifying his commitment to upholding a high level of fiduciary care for his clients. Based in Fullerton, California, he serves families and business owners throughout North Orange County and Los Angeles. Learn more by connecting with Kevin on LinkedIn.

Stress Test Scenarios