Investment Strategies

Strategies are high level plans to achieve one or more goals under conditions of uncertainty. Essentially, investment strategies are the tools used by investors/investment firms to realize gains in the financial markets. There are many types of strategies in the financial world, but  traditionally these main types of investment strategies are widely recognized and used by the traditional investment management companies:

Buy and Hold Strategies
These are the most basic and traditional of all strategies.  They attempt to buy any given instrument in the financial markets, and hold it for very long periods of time (usually in the order of years or decades) until the time comes to need the money (e.g. retirement).   They assume that the instrument that was bought will appreciate in value over the long periods of time (in spite of indeed having many negative fluctuations  during the holding period). 

Market Timing
These strategies (opposed to the Buy and Hold described above) make multiple buy  and sell decisions over the lifetime of an investment in any given instrument (as opposed to holding it ) in an attempt to detect optimal points to lock in the value appreciation and avoid the inevitable downturns.

Stock Picking 
These strategies use a systematic procedure to evaluate the financial instruments (stocks, commodities, etc)  in a portfolio and select which ones should be kept more time and which ones should be sold immediately and substituted by other instruments.  These strategies have specific criteria that determine when an instrument must be sold and when another one must be purchased.

Growth Investment Strategies
This type of strategy attempts to  invest in instruments (stocks) that look like they will grow significantly in the future.  This means it invests in fairly new companies whose value has yet to be realized and therefore locked into the valuation of their capital.   These are fairly risky as it may take a very long time (more than the investment objective) for this growth to be realized if at all.  These strategies usually have a Buy and Hold  component to them, as the capital is committed to buy the investment instruments and hold them until the growth is realized so that they can be sold.  During the holding period the capital is "locked in" and cannot be used for other investments or needs.

Income Investment Strategies
This type of strategy is more conservative and focuses on bringing income from already established instruments (stocks, bonds, commodities) while attempting to protect wealth at the same time by controlling risk very effectively.

Value Investment Strategies
This  type of strategy attempts to find instruments (stocks, commodities) that have come at cheaper prices as they have been undervalued by events in the marketplace.  The objective of these strategies is to locate instruments that are undervalued only temporarily because of some market imbalance, and will recuperate their former valuation in a certain expected period of time.
If you abstract yourself a little and really think about it, in reality all strategies mentioned before are in reality two classes:
  1. Buy and Hold:  Doesn't have any plan of when to sell, it just attempts to buy and instrument and hold it until (hopefully) the investment objective is achieved at the end of life of the investment.  These should really be called BUY AND HOPE.
  2. All the other strategies basically are the same type:  Use a defined set of rules to select when to buy and when to sell the instrument, over and over to maximize the extraction of value, until the investment goal is achieved.  What tells each strategy apart is the set of rules it follows to make the buy and sell decisions.

Therefore there are really three kinds of problems to be addressed by our investment strategies:
  1. Portfolio Selection Strategies:  What financial instruments (stocks, bonds, commodities, currencies, etc.) to invest in.
  2. Capital Allocation Strategies: How much capital to allocate to each financial instrument and each buy/sell decision.
  3. Position Management Strategies: When to buy it and sell it over time in order to extract the desired value from it while managing risk until the investment goal is achieved and the life of the investment finalizes.

Each portfolio is therefore managed always by a combination of 3 of these strategy types.
Our portfolio selection strategies focus on small caps stocks and ETFs trading in the U.S. Stock markets.   We will also have strategies that will handle the U.S. commodities and futures markets as well as stocks and ETFs from Europe and Asia.
Our positioning management strategies are designed to handle buying and selling frequencies as fast as several times in a day (although not as fast as to be considered a High Frequency algorithm) or as slow as several months.  
Our strategies are designed to steer through the market's chaotic volatility and identify when the instrument is appreciating and lock in profits from those periods and avoid the periods when the instrument's value goes down.