The KCM Dynamic Risk-Based model strategies are designed to fit an individual’s current risk tolerance level.

The models are built with equity and income-based mutual funds or ETFs, depending on the custodian’s investment offering.

Model Objective

Each model’s objective depends on risk level.  For example, the KCM Dynamic 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 retirement funds in the near term.

On the other end of the spectrum, the KCM Dynamic 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 retirement funds soon.

Here’s an example composition:

Model Strategy

We 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 optimize the asset allocation. We use equity and income-based mutual funds or ETFs to implement strategies. 

Our Valarian Equity Exposure strategy can be combined with these models, which would take equity holdings to cash during bear markets or major market corrections.

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Our Smart Glide target date (aka “Lifestyle”) model stategies are based on the glidepath concept: that an individual’s risk tolerance usually decreases over time as they get closer to retirement.

The benefit to the individual investor is clear: they are able to invest in one option and not worry about making changes as their risk tolerance shifts when they approach retirement.

KCM Smart Glide target date strategies are “intelligent” because they:

  1. Employ a combination of diversified strategic and actively-managed tactical strategies, several of which can go to cash in severe market conditions to preserve capital;
  2. Invest in ETFs to keep average underlying expense ratios low;
  3. Mitigate sequence of returns risk by being slightly more stock-oriented than many glide paths for younger investors and less stock-oriented than many glide paths for older investors;
  4. Emphasize low volatility stock and short duration bond strategies as retirement approaches; and
  5. Achieve superior diversification with increasing allocations to alternative strategies (such as risk parity) as retirement approaches, gaining exposure to return streams that are uncorrelated with stock and bond returns.

KCM Smart Glide strategies are adjusted periodically and managed “To Retirement,” which is a glide path targeting the retirement date as the point where the portfolio risk is at its lowest.  Retirement typically represents end of the Wealth Accumulation Stage and beginning of the Distribution Stage.

Target date models are well-suited as a qualified default option.

Here is a sample glidepath:

  Equity Income Alternative
2020 10% 60% 30%
2030 20% 50% 30%
2040 35% 35% 30%
2050 50% 20% 30%
2060 60% 10% 30%

glidepath

In the example to the left, the Alternative portion has the flexibility to invest in equity funds or income funds depending on market conditions, providing further potential for enhanced performance.

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