Portfolio Shield™ is a unique investment strategy designed to take risk when the equity markets are rising and reduce risk when the equity markets are falling. It is a formula-based long-only equity strategy that has a unique hedging mechanism to reduce the downside risk of the strategy when markets get volatile, or worse, during Bear markets.
There are five Portfolio Shield™ models to choose from depending on your investment goals and risk tolerance level.
Portfolio Shield™ is a dynamic strategy that adapts to changing market conditions monthly.
During Bull markets, when stock prices are rising, Portfolio Shield™ will adjust the portfolio to take advantage of rising stock prices.
During Bear markets, when stock prices are falling, Portfolio Shield™ will take a defensive allocation by reducing its equity exposure and increasing the portfolio’s allocation to bonds and cash.
Portfolio Shield™ is a simple, easy-to-understand investment strategy that utilizes the S&P 500®, Nasdaq-100, the Russell 2000 and a long-term Treasury bond fund to potentially deliver higher investment returns with less risk compared the S&P 500® over the past three, five, ten, and fifteen years, based on current and back-tested Morningstar® returns.
Portfolio Shield™ Growth, Balanced, Income, and Conservative models add an aggregate bond fund, made up of corporate bonds, U.S. Treasury securities, and Mortgage-Backed Securities, as a base layer to further reduce risk. By adding an aggregate bond fund, Portfolio Shield™ Growth, Balanced, Income, and Conservative have strong risk-adjusted returns despite their reduced risk.
By investing in the top-performing equity indices at all times, Portfolio Shield™ tends to rise with the broad stock market. Based on current and Morningstar® back-tested returns, Portfolio Shield™ has outperformed the S&P 500 twelve out of the past fifteen years, gross of advisory and transaction fees.
Portfolio Shield™ has two unique features to reduce risk and volatility, based on Standard Deviation and Beta:
On the first trading day of each month, two formulas are run, and all models are rebalanced according to the results.
The first formula looks at the relationship between stock prices and Treasury yields, since Treasury yields generally lead stock prices lower, on average, by three months. Should the market conditions warrant, the first formula will recommend the models reduce their equity exposure with a long-term U.S. government bond fund, or as I refer to it as hedging the strategy.
By adding or removing the Treasury bond fund from the allocation, Portfolio Shield™ can improve upside performance during Bull markets and reduce downside risk during Bear markets or volatile periods.
The second formula allocates each position in the strategy based on the individual volatility, or fluctuations, of each position. A greater percentage is given to the positions with the least volatility.
Most investment strategies available today were either developed decades ago or were designed to work under a specific set of conditions. Portfolio Shield™ was designed to work within the constructs of our monetary system and is optimized to work in today’s financial markets.
Portfolio Shield™ takes the best aspects of low-cost index investing and incorporates a unique way to reduce risk when equity markets are falling.
When compared to a traditional diversified portfolio, a volatility-controlled portfolio, or a “robot” advisory portfolio, Portfolio Shield’s unique design and hedging strategy allow Portfolio Shield™ to generate higher returns for less risk over 3-, 5-, and 10 years when compared to investing in the S&P 500®, based on current and backtested returns by Morningstar®.
The strategy is designed to allocate itself to the S&P 500®, Nasdaq-100, and Russell 2000 when the equity markets are rising. When the equity markets slow down or start to correct, the portfolio reduces its equity exposure by adding a long-term U.S. Treasury fund to the allocation.
The Treasury fund acts as a brake to reduce the downside risk of the portfolio when stocks go down. This works because when stocks fall, bonds typically rise. The bond allocation has the potential to offset a large portion of the fall in the equity allocation.
Portfolio Shield™ was designed around our monetary system, along with the business and credit cycles. With a deep understanding of how the stock and bond markets work inside our monetary system, the strategy can adjust between both as economic conditions change.
Portfolio Shield™ uses five highly liquid, low-fee ETFs. The largest traded ETFs for each position are used to maximize liquidity during the monthly rebalancing and to provide daily liquidity to meet client needs.
SPDR® S&P 500® ETF Trust (SPY)
Invesco QQQ ETF (QQQ)
iShares Russell 2000 ETF (IWM)
iShares Core Aggregate Bond ETF (AGG)
iShares 20+ Year Treasury Bond ETF (TLT)
With a limited number of potential investments in the allocation, investors will be able to easily determine how their portfolio is allocated.
All current and back-tested returns, along with all the risk analytics are validated by Morningstar®. Each month Morningstar® provides an updated Investment Detail Report on the Portfolio Shield™ strategy. Morningstar® is the premier provider of data and analytics for the financial services industry.
Portfolio Shield™ is a formula-based strategy that is rebalanced on the first trading day of each month based on its formulas. The formulas are not overridden regardless of market conditions.
Future changes to the monetary system, such as a repeal of parts of the Federal Reserve Act to allow direct monetization of debt, may require changes to the strategy.
The advisory fee to manage Portfolio Shield™ is 1% per year on household accounts under $2 million and 0.5% per year on the total amount for household accounts over $2 million.
The expense ratio for each ETF used by Portfolio Shield™ is stated in the prospectus of each ETF. The returns of each ETF are net of their expense ratio.
The minimum investment for Portfolio Shield™ is $1,500, or enough to purchase one of each ETF in the model.
Investors unable to meet the minimum investment requirement may still open an account and are encouraged to make regular contributions but will not get the full model until the minimums are met.
This is the complete 12-page guide (PDF) to the most common questions asked about Portfolio Shield™, including fees, the minimum investment, the custodian, liquidity, account access, the inception date, and how to start investing with Portfolio Shield™.
To schedule an introductory meeting to go over Portfolio Shield™ and answer any questions you might have, please complete the Contact Form and check the box for Portfolio Shield™, e-mail Steve at his Securities e-mail address available on his Contact Page or call Steve's office at (661) 398-9900.
Send an e-mail to Steve at his Securities e-mail address available on his Contact Page with the subject: New Portfolio Shield Account. (Portfolio Shield™ is currently only available to U.S. citizens and permanent residents with a U.S. address.) To open a new account, include all names as they should be on the account, type of account (Individual, Joint, Trust, Traditional IRA, Roth IRA, etc.), and an e-mail addresses for each person. To transfer an existing account, attach all pages of the most recent quarterly or monthly statment for the account you wish to transfer and include instructions if the entire account should be moved, or if it is a partial transfer. Steve's assistant will send you all of the paperwork to review and sign by DocuSign.
Once your DocuSign application has been received by TD Ameritrade for processing, Steve will send you a private link to a Riskalyze® risk-tolerance questionnaire to help determine which Portfolio Shield™ strategy best matches your risk tolerance. You may select one Portfolio Shield™ strategy per account.
Once your new TD Ameritrade account has been opened, Steve will send you instructions to create your online account.
Unless your account is being funded by a transfer or rollover from an existing account, Steve will enable the option for you to deposit funds from your bank account. Transfers or rollovers from an existing account can take several weeks or more.
TD Ameritrade automatically notifies Steve anytime new funds are deposited or transfered in. Funds are invested within 2-3 business days of deposit. Going forward, you can monitor your account online and a few days after each monthy rebalance, you will recieve an e-mail updating you on the changes to the allocation and links to the latest Morningstar® fact sheets.
*Returns as of 05/31/2021. Gross of advisory and transaction fees.
**Risk is based on the Beta.
The hypothetical back-tested information provided herein is illustrative only and derived from a proprietary Model Strategy designed with the benefit of hindsight based on certain data (which may or may not correspond with the data that someone else would use to back-test) and, market or economic condition assumptions, and estimates (not all of which may be specified herein and which are subject to change without notice). The hypothetical returns are (i) gross of annual advisory fee of 1%, (ii) do not take index fees or transaction costs into account, and (iii) do not reflect the reinvestment of dividends or other earnings. Investing involves risk including the possible loss of principal. Atlas Financial Advisors, Inc. makes no assurance that the Model Strategy will achieve its investment objectives.
Advisory services offered by Atlas Financial Advisors Inc., a Registered Investment Advisory firm. The opinions expressed on this site are those solely of Steven Van Metre and do not necessarily represent those of Steven Van Metre Financial or Atlas Financial Advisors, Inc. (AFA). This website is made available for educational and entertainment purposes only.
Steven Van Metre and AFA disclaim responsibility for updating information and disclaim responsibility for third-party content, including information accessed through hyperlinks. Prior to making any investment decisions, one should seek qualified financial, tax or legal advice as it pertains to their situation and not base any decisions on a blog post, online review or third-party content.
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Steven Van Metre, CFP®
Steven Van Metre Financial
5901 Sundale Ave Ste B
Bakersfield CA 93309