Asset Allocation is one of the investment strategies employed in the ProFutures Dynamic Allocation Program.  The asset allocation model used by ProFutures is essentially a buy-and-hold investment strategy that employs the principles of Modern Portfolio Theory (MPT) developed by Dr. Harry Markowitz, a Nobel Prize winning economist.

MPT takes a "big picture" view of your mutual fund investments and is focused on portfolio performance rather than owning one or two "hot funds."  Mutual fund portfolios are designed in such a way that the individual investments work together to reduce risk and produce the desired return.

Why Do I Need An Asset Allocation Strategy?

Many wealthy investors, public corporations, and large pension plans use professional money managers to invest at least part of their money.  The reasons vary, but perhaps the biggest reason is that these "sophisticated" investors already know the risks of going it alone. There are literally tens of thousands of stocks, bonds, mutual funds, and other investment alternatives out there from which to choose. Those who chase elusive market-beating returns often fall prey to conflicting advice and frequent switching among investments.

Dalbar Studies Provide Proof

Beginning in 1995, Dalbar, Inc., an investment research firm located in Boston, began a series of yearly studies to determine how individual investors in mutual funds fared compared to the overall market. The results of these studies have been consistent over time:

Efforts to chase the latest hot performance resulted in the average equity mutual fund investor earning over 10 percentage points per year less, on average, as compared to the S&P 500 Index, according to a recent Dalbar press release. (2001 Update Analysis of Investor Behavior Report." Dalbar, Inc.)

Why Are Investors Switching So Often?

Never before has there been so much "financial news" available to the general public. Everywhere you go, you find televisions tuned to CNBC, MSNBC, or some other financial news network. In your car, radio talk show hosts beckon to you with the latest financial strategies. Newsstands are also full of publications about investing, each promising the latest "hot" funds and advice.

All this free-flowing information should be good news, right? Unfortunately, it often leads to confusion. Even worse, these financial shows feel they must continually come up with new and interesting ideas.

These frequent "new" investment strategies, however, send mixed signals to investors. They often feel they must participate in the latest investment "fad" in order to attain their financial goals. Actually, nothing could be further from the truth.  The bursting of the "tech bubble" in 2000 and the loss of confidence in corporate accounting in 2002 brought down many of the "new economy" companies whose stock prices were based more on fallacy than fact.

Diversification of a portfolio through "asset allocation" is widely accepted as a leading investment management technique. The problem is that it is far too old-fashioned and boring to appear on the financial news shows.  However, at the end of the day, what would you rather have - a "trendy" portfolio or enough money to meet your financial goals?

How The Dynamic Allocation Program Can Help You

Diversification is easy to talk about, but sometimes difficult to actually do. Some investors think they are diversified because they own a single mutual fund, since the fund owns stocks of many different companies. Others feel that they are diversified if they own several different mutual funds, but do not realize that the mutual funds they own are actually investing in the same types of companies. Unfortunately, neither of these provides adequate portfolio diversification.

To help solve this dilemma, ProFutures developed its proprietary asset allocation program, combining the best of goal-oriented asset allocation with investment selection based on specific criteria.  Your ProFutures Investor Representative will help you select a portfolio of top-performing mutual funds based on your personal financial situation, and will help you to have the discipline to stay invested, even during inevitable down markets when you may be tempted to give up.

Our Investor Representatives are experienced not only in asset allocation techniques, but also in evaluating your personal financial situation. Each portfolio is customized to your particular needs, not simply selected from a limited list of pre-arranged allocation models.

Dollar Cost Averaging Makes The Decision Easy

Procrastination is often the biggest obstacle that stands between you and your investment goals. Stock market volatility literally paralyzes many investors from taking action. That's why the Dynamic Allocation Program offers "dollar cost averaging" - a systematic way to ease into the stock market over time, thus reducing the effects of market volatility on a large, lump-sum investment.

Why ProFutures?

Admittedly, asset allocation programs are not hard to find.  Almost every brokerage firm offers some form of asset allocation service, and many Internet websites offer impersonal asset allocation assistance.  So, why should you look to ProFutures for this service? The answer is simple:

ProFutures offers the ability to combine an asset allocation strategy with other investment strategies to provide what we call "compound diversification."

This means that your portfolio is diversified in multiple ways, as follows:

First, it is diversified through the use of mutual funds, so your investment returns do not depend upon the fate of one stock or bond issuer.  This is good to know in these days of corporate and accounting firm misconduct.  The mutual fund manager is in a much better position to determine the true value of a company than those of us who must rely on research that may be tainted by conflicts of interest.

A second area of diversification involves investments in various asset classes.  Clearly, different asset classes, such as large-cap stocks, small-cap stocks, bonds, etc. behave differently over time.  In many instances, gains in one or more asset classes will cancel out losses in another, resulting in a less volatile portfolio.

A final area of diversification is into various investment strategies.  While diversifying into various asset classes through mutual funds is good, a down market will likely result in losses in most, if not all, of these asset classes.  At such times, it is beneficial to have other investment strategies that are not correlated with the stock market.  Active management investments such as market-timing and rotational programs provide such diversification, as do alternative investments such as hedge funds and professionally managed futures funds.

In addition, ProFutures has been meeting the financial and investment needs of our clients on a nationwide basis since 1984.  While most other financial firms offer asset allocation programs, many of these are limited to the mutual funds they sponsor, thus restricting flexibility. 

ProFutures is independent, so we are free to select from a wide array of mutual fund families and Advisors.  As a Registered Investment Advisor, ProFutures is able to offer many of these investments at lower minimums and/or lower costs than are available to the general public through the T.D. Waterhouse Institutional brokerage platform.

For more information on how our asset allocation program can be used as part of an overall Dynamic Allocation diversification strategy, click  here to download the Confidential Investor Profile and begin the information gathering process. If you have specific questions about the Asset Allocation Program, please call 800-348-3601 and speak to one of ProFutures friendly and experienced Investor Representatives

ProFutures Capital Management Form ADV Part II