Taking the time & effort to understand an investment (be it a business, a bond, an index fund, an ETF) months or years before you invest, can dramatically improve your ability to earn a reasonable return. With that in mind Sewickley Financial takes the approach of monitoring a list of investments across asset classes of interest. A brief outline of the process is given below…
- Define Investment Framework
- Secular Trends & Demographics are defined
- Macroeconomic trends are identified
- US & Global GDP growth
- S&P projections -EPS growth by sector
- Interest Rates, Exchange Rates
- The sectors identified in the major averages are Force Ranked across 4 categories:
- Macro, Earnings Growth, Volatility, Sentiment
- ETFs are Force Ranked across 5 categories:
- Macro, Yield, Volatility, Diversification, Secular
- An Equity Watch List is Force Ranked across 4 categories:
- Sector Rank, Secular Growth, Execution, Sentiment
Existing holdings are not aggressively adjusted to the new weightings as this can adversely impact results through increased costs & taxes. Rather, changes are made to existing holdings where risk/reward justifies the shift.
The ETF & Equity Investable Watch lists are established by the Principal and involve typically 60 or so instruments/companies per list. Changes to the composition of these lists are made only when the work shows the long-term investment case qualifies for an addition or deletion.