- Multi asset revesting means rotating capital in and out of assets using an asset hierarchy, zeroing in on bonds, commodities, exchange-traded funds (ETFs) and more.
- May help to avoid prolonged periods of portfolio decline (drawdowns) through a system to identify asset revesting signals.
- May be deployed by anyone, but is more important for investors 45 or older with a shorter investment horizon.
What is Multi Asset Revesting?
A Multi Asset Revesting strategy involves moving capital out of falling assets and into rising assets within a setlist. The strategy is open to using any group of investments you can imagine, from CDs and futures to annuities, collectibles like art and coins, CFD’s, mutual funds and ETFs.
The primary objective of multi asset management is to have a selection of uncorrelated assets (called the asset hierarchy) and rotating capital into the best asset for the current market condition. This results in investors only holding assets that are rising in value, essentially gaining above-average returns while dramatically reducing portfolio volatility.
The asset hierarchy lists assets by their rank—with lower-risk, lower-return assets such as treasury bonds and the dollar index ranked lower than assets with higher risk and return potential, such as the S&P 500 and Nasdaq. By limiting trading options to the asset hierarchy, capital is always allocated to the best-performing, highest-ranked investment.
For example, if a high-ranking asset like the S&P 500 is trending downward, portfolio capital is invested in lower-ranked assets like treasury bonds or the dollar index. But when the top ranked asset generates a new revesting signal, the bond or dollar position must be closed and the capital rotated into that higher-ranked position to maximize returns and to reduce the risk of owning assets falling in value.
Why choose Multi Asset Revesting?
Multi asset revesting can be a useful approach for investors who value low volatility, capital preservation, bear-market protection and maximized performance. Unlike the traditional and volatile buy-and-hold strategy, an asset revesting strategy can generate signals to sell assets that are about to fall—so the revester doesn’t have to hold them and cross their fingers for eventual recovery. Because the strategy only holds assets that are rising in value, it provides a consistent opportunity for growth. Also, by adhering to a proven asset hierarchy list, investors can substantially reduce drawdowns through positions with lower volatility.
If the financial market is extremely volatile, asset revesters know how to take advantage of being in cash by owning a US Dollar Index ETF or leaving cash sitting in their brokerage account waiting for a low-risk, high-probability asset revesting signal. By rotating investment capital to multi asset vs equity stock positions, it becomes possibly to generate gains during stock market corrections.
What Kind of Assets Work for Multi Asset Revesting?
An asset revesting model can zero-in on bonds, commodities, ETFs and more. Since most investors hold a diverse array of investments in their portfolios, it’s a pretty simple strategy to integrate. Whether the hierarchy includes stocks, bonds, commodities, or currencies, asset revesting requires one thing: rising assets.
Though you may love a certain stock, ETF, commodity, etc., remember that it does not love you back. It does not care that you have put all your money into its performance. Put another way, a stock, ETF, commodity, or other asset will not behave as you want it to, just because you love it and think the market and economic climate favor that particular asset.
Pros and Cons of Multi Asset Revesting
It is important to carefully consider the pros and cons of this strategy before deciding if it is right for you.
- Helps to avoid prolonged periods of portfolio decline (drawdowns).
- Involves investing in non-correlated positions, which can help reduce portfolio volatility.
- Offers more consistent and predictable portfolio growth.
- Lower fees than other investment approaches.
- Can be automatically traded in brokerage accounts.
- Helps reduce financial and emotional stress.
- Helps fund an uncompromised retirement.
- Requires a system to identify asset revesting signals.
- May underperform during extended bull market runs.
- Requires ongoing adjustment of targets and stops.
Is Multi Asset Revesting Right for You?
Multi-asset revesting may be a good fit for investors seeking inflation protection, asset preservation, lower fees, reduced sequence of returns risk, lower drawdowns, above-average returns (particularly during market corrections), and a more predictable and rewarding investment experience.
Investors should carefully consider their financial goals, risk tolerance, investment objectives and experience before deciding whether multi asset revesting is the right strategy for them. Multi asset revesting may be more important for investors aged 45+ who have shorter-term investment horizons; particularly those who are three to thirteen years away from retirement, or who are already retired and don’t have time on their side for recovering from a huge drawdown.
A more diversified and passive investment approach, such as the buy-and-hold strategy can work well for investors with longer-term goals, such as saving for retirement while under the age of 45. But buy-and-hold becomes increasingly risky for older investors who cannot stomach or absorb the 20% to 55% multi-year drawdowns that occur during bear markets and recessions. Those dissatisfied with the limitations of a traditional buy-and-hold investing method used at firms like Fidelity or Schwab should consider making the shift to multi-asset revesting.
Multi-Asset Revesting Signals
Asset revesting signals are found through a process of technical analysis. For those who don’t want to monitor all the assets on their hierarchy, an asset revesting signal provider is key. This can be a little tricky, as asset revesting is an emerging category in the investing world, but The Technical Traders Ltd. is a good place to start as their asset revesting signals have been averaging a compounded annual return of over 15% a year since 2007 with a maximum drawdown of less than 6%.
Can Multi-Asset Revesting Strategies be Automated?
Robo-advisors such as Betterment and Wealthfront are becoming more popular as a way for people to invest their money without having to pay high fees to a traditional financial advisor. These companies use automated trading to help people reduce the cost of investing and potentially even outperform traditional advisors.
A robo-advisor is like a digital assistant that can help you make smart investment decisions based on your goals and risk tolerance. Wealthfront is a fully automated service that doesn’t require an advisor while Betterment uses a more diversified strategy and has an option for additional advisor services. However, it’s important to note that both companies have limitations in the investments they offer, which can limit the potential returns for investors. For example, Betterment can’t buy stocks, ETFs or REITs, so investors have a limited investment selection for their portfolio and can miss out on key opportunities each year.
Recent data from the Robo Report suggests that the returns on investment from most robo-advisors over the last five years have been poor, with an average range of roughly 4% per year. Investors looking for an alternative to traditional buy-and-hold methods offered by firms like Fidelity or Schwab are seeing the value in asset revesting, which can be a great option for being autotraded in a retirement account.
For investors who can no longer afford to ride out bear markets and risk their retirement lifestyle with their investments, a consistent growth strategy using an asset revesting signals provider could be the solution. Unlike traditional advisors and robo-advisors, multi-asset revesting signal providers with an autotraded asset revesting service, such as The Technical Traders Ltd., simplify investing. Whichever autotrading service an investor chooses, they should make sure the service employs technical analysis, risk management, and position management to protect capital. Investors should ask whether the positions are actively managed following an asset hierarchy so they can avoid downtrends and profit during both bull and bear markets, building wealth at a fraction of the cost of traditional investing,