Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2024

Quarterly recap



Current market environment performance of dynamic, risk-managed investment solutions.

By Jerry Wagner

My brother, Charlie, and his family recently adopted a new furry friend, Buzz. Pictured above, Buzz is a mini goldendoodle. When they brought him home, he was just three months old. Charlie has had many dogs, but it’s been a long time since he has had a puppy. And that’s always a learning experience!

In looking for training materials to help him out, I found an article called “These 7 Dog-Training Principles Work for Humans, Too.” The author credited the seven principles to David Kabler, a master trainer with over 25 years of experience and founder of the Kabler School for Dogs in Asheville, North Carolina. I passed his hints on to Charlie, but I was struck by how these principles also applied to investing. Here’s a brief review for dog lovers and investors alike to learn from:

1. First and foremost, be patient

Investing and dog training both thrive on patience. While the urge to witness rapid results or immediate behavioral changes can be overwhelming, actual progress often requires time and endurance. Both a trainer and an investor must set obtainable goals and have reasonable expectations, and then stick with the plan.

Much like dog trainers understand that holding a clear vision of a pet’s behavioral progression is paramount, investors need to hang on to their investment outlook without hastily shifting gears. Progress, be it in an animal’s behavior or an asset’s value, is often a slow burn.

I often tell investors that they need at least one complete market cycle, encompassing both a bull and a bear market, to be able to judge a strategy. In reality, it probably takes at least a couple of both. This is because every bull or bear is different, and techniques can be effective in one environment and less effective in the next.

When evaluating an investment, you typically look at its effectiveness over many years, even decades. When you invest and move to real time, it is critical to be patient and let the plan realize its potential. You wouldn’t buy a strategy based on only a few months of market history. Why would you sell it?

2. Practice restraint

This is similar to patience but different. Dog trainers learn to not expect too much too soon. This means ensuring training sessions aren’t exhaustive but are instead impactful. Overtraining can lead to burnout and behavioral issues.

Investors should similarly resist the temptation to overexert or prematurely react to market fluctuations. Acting impulsively can lead to losses or missed opportunities.

On a broader scale, this concept resonates with the tortoise and hare fable. Slow and steady often wins the race. Both dog training and investing require a marathon mentality rather than a sprint approach. The long-term perspective, encompassing restraint and steady pacing, often yields more fruitful results.

3. Stay consistent

Consistency lays the foundation for trust and predictability. Just as dogs benefit from regular routines and training schedules, investments prosper from a consistent approach.

Dog trainers emphasize the importance of regular training sessions, predictable reactions, and routine feedback. This clarity enables dogs to understand what’s expected of them, fostering a bond of trust and respect.

In the financial world, emotions and erratic decision-making can hinder the growth of investments. Market history underscores the benefits of a consistent investment strategy, emphasizing the risks associated with reactionary or whimsical financial decisions. By remaining steadfast in their approach, investors can cultivate a more balanced portfolio over time.

For me, consistency has meant seeking out strategies that can be repeated over time to achieve profitable results. I know that not every trade will be beneficial, but I also realize that if I apply an approach that has a high probability of success consistently over time, I am likely to come out ahead.

Using quantifiable techniques reproduced by a computer allows me to test strategies for how well they performed in the past. From that, I can gain the confidence to employ them in the future. Then, when I put the approach into practice, the computer can ensure that the buy and sell decisions are consistent with the original methodology. Emotion is eliminated from the equation.

4. Pay attention

The art of mindfulness is invaluable. Successful dog trainers recognize the importance of being present, observing subtle behavioral cues, and understanding the unique temperament of each dog. This undivided attention allows trainers to tailor their approach, ensuring practical training sessions.

Similarly, astute investors reap the benefits of attentive market observation. By focusing on current trends, understanding economic indicators, and anticipating potential shifts, they can better position their portfolio for success.

In addition, if you have ever tried to train a child or a dog in a room full of distractions, you know how impossible this task is. Yet, in the present financial market, we are presented with the same situation. News, information, new ideas, new companies, new themes—the distractions abound.

Most investors can’t focus on what is essential with so many distractions. They do not have the time or acumen to pay this close attention to their investments. They need someone to help them sort it out. Employing investment professionals to do this provides an answer. Flexible Plan Investments (FPI) has been successfully monitoring the financial markets on behalf of investors and their advisers for over 40 years.

5. Nurture your nature

At the heart of successful dog training is the understanding and appreciation of a dog’s inherent nature. A skilled trainer recognizes the dog’s natural instincts and tailors their approach accordingly, leading to more effective and harmonious training sessions. Similarly, investors must recognize and align their portfolios with their innate investment style, risk tolerance, and financial objectives.

Employing an investment manager can help in this regard, but it is also essential that the manager be attuned to the investor. At FPI, we use a suitability questionnaire to create a profile for each investor, seeking to determine their goals, level of investment sophistication, and attitude toward risk. We do this to better match the strategies employed to the investor’s goals and risk tolerance.

In addition, we employ our proprietary OnTarget Investing process to provide each investor with a customized benchmark for their investing. Then, we report on their progress in matching this benchmark every month.

The debate of nature versus nurture is age-old. However, in both dog training and investing, it’s about blending the two seamlessly. Recognizing inherent tendencies and then strategically nurturing them often results in the most authentic and successful outcomes.

6. Be willing to adapt

A one-size-fits-all approach seldom works. Dog trainers understand that each dog is unique, and strategies might need alterations based on a dog’s response. There are times when trainers have to diverge from established methods to best cater to a dog’s individual needs. Adaptability ensures that the training remains adequate and relevant.

For investors, market conditions can be unpredictable. An investment strategy that worked during a bullish market might be less effective during a bearish phase. The ability to recognize these shifts and make informed adjustments to one’s investment strategy is crucial. Rigidly adhering to a single approach can be detrimental, whereas adaptability can pave the way for continued success.

One of the services that sets FPI apart from the investment-strategist pack is that most of our strategies have built-in mechanisms to learn and adapt. We have never believed in a “holy grail” method of investing. No strategy works every time in every market.

And the financial market is a dynamic, constantly changing place. We focus on investor behavior because it changes more slowly. Good habits are reinforced, and bad habits are discouraged, but our brains tend to respond in a rote fashion to new stimuli. For most investors, price changes are the most prominent of these stimuli. So we build around the patterns in this behavior that our quantitative, computer-driven research ferrets out.

Still, even these patterns can change over time as investors discover them, abuse them, and alter the market’s behavior. A successful strategy must constantly seek to learn these changes and evolve to seek new opportunities or new ways of interpreting market behavior.

At FPI, we use both machine-learning techniques and human intervention to monitor all of our strategies and seek to improve both their ability to avoid risk and pursue opportunities. It is a process engrained in our methodology.

7. Have fun

The journey is as important as the destination. Dog trainers often emphasize the importance of enjoying the training process. Celebrating small victories, appreciating the shared moments, and learning from setbacks can make the journey more rewarding. Positive reinforcement, both for dogs and for trainers, is essential, emphasizing rewards over punishments.

Similarly, for investors, the investment journey should be fulfilling. While the end goal is financial growth, the process of researching, strategizing, and even navigating the market’s ups and downs can be exhilarating. Adopting a positive mindset, enjoying the learning curve, and taking setbacks in stride can make the investment journey more enjoyable and sustainable.

Still, in both training and investing, there is no guarantee of success. Charlie read the training advice and ultimately enrolled Buzz in a training class. In just a few weeks, Buzz had learned to sit, stay, and heel. On graduation day, Buzz passed all the obedience tests with flying colors, and he (and Charlie) proudly received the AKA Star Puppy Award. Charlie took Buzz home to tell the family the good news. Upon arrival, Buzz celebrated by promptly peeing on the carpet!


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