KCM’s risk-based models have as their primary objective long-term growth of capital. As a secondary, but equally important goal, the models seek to manage volatility and market risk. Making money during good times is important, but it is equally important to protect your assets during bad times. It is a mathematical fact that it is harder to make up losses than to make money. Therefore, the primary goal during tenuous markets is capital preservation.
Each model’s objective depends on risk level. For example, the KCM Conservative portfolio is designed to be a comprehensive investment solution for individuals who are conservative in their tolerance for risk. In general, the individual appropriate for this portfolio is one seeking growth of capital, but who is less willing to assume large fluctuations in the financial markets, and may need to access their funds in the near term.
On the other end of the spectrum, the KCM Aggressive portfolio is appropriate for individuals looking for growth of capital, willing to assume larger fluctuations in the financial markets, and does not need to access their funds soon.
The KCM risk-based portfolios utilize Modern Portfolio Theory and take into account aspects of Behavioral Finance and forward-looking financial market conditions. Our process is based on a combination of tactical and strategic investment principles designed to protect against catastrophic loss and optimize the asset allocation. We use equity and income-based mutual funds or ETFs to implement strategies.
During major market corrections, we will take some or all of the models equity holdings to cash, as we do in the KCM Macro Trends Fund.
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