The Focus Four model is a global, tactical model with the objective of long-term capital appreciation while minimizing risk.
It uses a dual-ranking system based on the underlying risk of the asset classes in the model. This process helps to reduce volatility. ETFs are separated by risk, then ranked. The top ETFs from each system are chosen for investment.
The model ranks 14 ETFs in U.S. Stocks, International and Emerging Markets, Real Estate, Commodities, Gold, U.S. Treasuries, Corporate, High Yield, and International Bonds.
The Focus Four model is rebalanced monthly and includes our downside risk protector©
The model's dynamic allocation ranks market opportunities based on Relative Return, Absolute Return, and Volatility. Monthly, mathematical scoring ranks ETFs for each investment model and the top-ranking positions are allocated to meet current market conditions.
As ETFs move in and out of favor, the model rotates its market exposure, alternating its positions based on their mathematical ranking relative to the prior month's allocation and each other.
Although not anticipated, in some market conditions, it is possible that cash and fixed income positions can be the highest mathematical ranking within each model.
What is Drawdown?
Drawdown is the measure from the highest high to the lowest low or peak-to-trough during a specific time period. It is an important measurement of risk. A larger drawdown requires a more significant increase in the portfolio to recover.
Volatility measures the change in price of an investment. The higher the volatility, the higher the difference between the high and the low of an investment’s price.