Diversify Your Strategies, Not Your Assets.
An "asset class" is defined as a specific category of related financial instruments, such as stocks, bonds or cash. These three categories are often considered the primary asset classes, although people often include real estate as well.
Institutions and other financial professionals espouse the need for portfolios to be properly diversified across multiple asset classes in order to diversify risk. Decades of academic research support the view that the selection of each asset class in a portfolio is far more important than the selection of the individual stocks or other positions. However, there's a single and significant flaw in their research findings. It's the same fault inherent in asset classes in general. Asset classes are intentionally self-limiting, and their use is incapable of creating true portfolio diversification for two primary reasons:
By classifying asset classes as being long only in related markets, the various asset classes expose people to the same "return drivers." As a result, there is a risk that the failure of a single return driver will negatively impact multiple asset classes. Limiting your diversification opportunities to asset classes eliminates numerous trading strategies that, because they are powered by entirely separate return drivers, can provide tremendous diversification value to your portfolio.
When looking at a portfolio diversified across asset classes, it is clear that most of those asset classes are dependent on the same return drivers or baseline conditions for producing their returns. This unnecessarily exposes the portfolio to "event" risk, meaning that a single event, if it is the wrong one, can negatively affect the entire portfolio.
The figure below displays the performance of the components of a portfolio based on conventional wisdom during the bear market of 2007-2009. This portfolio includes 10 asset classes "diversified" across stocks, bonds and real estate, in both the United States and internationally. According to conventional wisdom, this portfolio is considered highly diversified. Of the 10 asset classes, however, only U. S. and international bonds avoided losses. All other asset classes declined sharply. A portfolio allocated equally to each asset class declined by more than 40% over the 16-month period. It is obvious that conventional investment wisdom failed.
Portfolios constructed around asset classes are unnecessarily risky, and taking on unnecessary risk is the equivalent of gambling with your money.
A "trading strategy" is comprised of two components: a system that exploits a return driver and a market that is best suited to capture the returns promised by the return driver.
Return Driver (system) + Market = Trading Strategy.
Trading strategies are then combined to create a balanced and diversified investment portfolio.
The asset classes contained in the portfolios of most investors are simply a restricted subset of the potentially hundreds (or more) of combinations of return drivers and markets available to be incorporated into a portfolio. For example, the U. S. equity asset class is actually the strategy comprised of the system of buying into long positions in the market "U. S. equities."
Definition of Risk.
Therefore, risk is not determined by the volatility of returns. In fact, highly volatile trading strategies, if based on a sound, logical return driver, can be a "safe" contributor to a portfolio.
So, if the volatility of returns is not an acceptable definition of risk, what is a more appropriate definition? Answer: drawdowns. Drawdowns are the greatest impediment to high returns and the true measure of risk. It is far easier to lose money than it is to recover from those losses. For example, to recover from an 80% drawdown requires four times the effort than does a 50% drawdown. A risk management plan must specifically address the destructive power of drawdowns.
Volatility and Correlation.
Portfolio performance measurement ratios, such as the Sharpe Ratio, are typically expressed as the relationship between risk-adjusted returns and portfolio risk. Therefore, when volatility decreases, the Sharpe Ratio increases.
Once we have developed trading strategies based on sound return drivers, true portfolio diversification then involves the process of combining seemingly riskier individual positions into a safer diversified portfolio. How does the combination of positions improve the performance of a portfolio? The answer is based on correlation, which is defined as "a statistical measure of how two securities move in relation to each other." How is this helpful? If returns are negatively correlated with each other, when one return stream is losing, another return stream is likely winning. Therefore, diversification reduces overall volatility. The volatility of the combined return stream is lower than the volatility of the individual return streams.
This diversification of return streams reduces portfolio volatility and since volatility is the denominator of the Sharpe Ratio, as volatility decreases, the Sharpe Ratio increases. In fact, in the extreme case of perfect negative correlation, the Sharpe Ratio goes to infinity! Therefore, the goal of true portfolio diversification is to combine strategies (based on sound return drivers), which are non-correlated or (even better) negatively correlated.
The Bottom Line.
True portfolio diversification provides the highest returns over time. A truly diversified portfolio will provide you with greater returns and less risk than a portfolio diversified only across conventional asset classes. In addition, the predictability of future performance can be increased by expanding the number of diverse return drivers employed in a portfolio.
The benefits of portfolio diversification are real and provide serious tangible results. By simply learning how to identify additional return drivers, you will be able to shift from gambling your portfolio on only one of them to becoming an "investor" by diversifying across many of them.
Diversified Trading Strategies, Inc.
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With the nosedived economic conditions almost all the investment options have made the public's money go down the drain. However, things seem to be very different in the case of investments through Chuck Hughes' ETF Trading strategy.
Chuck Hughes' ETF Trading Strategy Remains Unaffected By Global Recession.
With the nosedived economic conditions almost all the investment options have made the public's money go down the drain. However, things seem to be very different in the case of investments through Chuck Hughes' ETF Trading strategy.
January 16, 2010 (Newswire) - Carlsbad, CA January 16, 2010 - People out there are afraid to get into any kind of investment during this Global recession period. With the crash of the stock markets, there are some huge investors who are struggling to survive this toughest economic period. Due to this reason, most of the investment options that still have their charm often remain undiscovered. Chuck Hughes' ETF trading strategy option is one such investment that is unaffected by the global recession. Unfortunately only a few people have discovered it. "Chuck Hughes ETF trading startegy covers a wide range of investment options such as stock options, future options and currency options. People out there should remember the fact that this is the right time to make investments through stock options and future options. All they have to do is to plan the ETF trading strategies effectively" says Max Day of chuckhughesadvisory (chuckhughesadvisory).
Chuck Hughes' ETF trading strategy is not strange to the investment world. This ETF trading system has found a great success back in the year 2008. You must have known that despite the wild Wall Street the previous year, Chuck Hughes' ETF trading strategies finished with 307.7% gains. Speaking about the success of Chuck Hughes' ETF trading strategies, Max Day said, "The success of Chuck Hughes ETF trading strategy is already proven in the previous year. The 307.7% gains that we have achieved in the previous year is actually a huge record. The investors out there, who are aware of this record, have realized the fact that not even recession can stop the growth of Chuck Hughes (chuckhughesadvisory) ETF trading strategy."
Speaking on the move, Max Day said, "The ETF trading system has many advantages when compared to all the other investment options available today. The negligible impact of the global market conditions on this kind of investment is obviously one of the main advantages. The possibility to invest on a wide range of asset classes is another benefit of ETF trading system. Moreover, the ETF trading system assures that you will not lose more money than you invest under any circumstances. With the Chuck Hughes ETF strategy, the chances of increasing your investment are very high, no matter what the market condition is."
Diversified Trading Strategies INC. DELEBERATE !! DECEPTIVE!! FRAUDGILENT !! BUSENISE PRACTICE Carlsbad, California.
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[THEY MUST BE DEALT WITH, UP FOR ANYTHING, SUGGEST CLASS ACTION LAW SUIT.]
PLEASE IF ANY CAN HELP! OR IF I CAN HELP! HERE IS MY INFO MIKE **** PHONE(((redacted))) (((redacted)))
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This report was posted on Ripoff Report on 02/21/2011 01:53 PM and is a permanent record located here: ripoffreport/reports/diversified-trading-strategies-inc/carlsbad-california-92009/diversified-trading-strategies-inc-deleberate-deceptive-fraudgilent-busenise-pra-698139. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year. Ripoff Report has an exclusive license to this report. It may not be copied without the written permission of Ripoff Report. READ: Foreign websites steal our content.
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Diversified Trading Strategies - Chuck Hughes Advisory all hype, no action Carlsbad, California.
*Consumer Comment : Comment for Chris Borgman of DTS.
*Author of original report : COMPLETELY INCOMPETENT, A TOTAL LOSER.
*Consumer Comment : My Experience.
*REBUTTAL Individual responds : The Reality of the Situation.
This is the best way to manage and repair your business reputation. Hiding negative complaints is only a Band-Aid. Consumers want to see how a business took care of business.
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Chris Borgman of Diversified Trading sold me this Chuck Hughes GPS Advisory program touting it as terribly profitable, claiming it would produce 2-1/2 times my investment over the course of a year. There is a charge of $5,000 which works out to be $416 per month. After being in the program one month, I have a profit of $108.18.
Do the math: 416 (monthly fee $5000/yr) minus 108.18 (profit) = $307.82 (what it is cost me for the first month). If they do this each and every month: multiply 307.82 cost x 12 months = 3893.84. It will cost me $3893.84 for the year and I will have a $108.18 monthly profit multiplying out to $1298.16 for the year. That is providing I continue to go along with this nonsense and don't incur larger losses. Yes, I know in trading you can have up and down trades, but if they cannot handle one month of several trades and land a profit commensurate with the cost of the program with all this "successful" professional trading experience, heaven knows what a disaster this would be letting this continue.
I asked for a refund and they said to send them my brokerage statement so they can determine "what happened." Well, if they are following their trades, I would guess they would know what happened, wouldn't they? I will keep you posted as to what happens on this, but I will contest this on my Visa for the time being. When I called Chris Borgman on Friday, 10/23/09, he said he doesn't know why I could be unhappy with this program that returns 4 times your investment. Hmmm, first it was 2-1/2 times your investment before I signed up and now it is 4 times the investment when I am unhappy? Seems like it is getting more profitable once they have your $5,000.
If they are so good, why are they not honorable refunding the money? I could almost understand one month's "service" fee for bad advice, but to hold you to another 11 months that you do not want? They have given me nothing to warrant a $416 fee, much less a whole year's fee. They advertise Chuck Hughes as a professional, someone with a lifetime of highly profitable trading experience. Something is looking mighty stinky here. Is there anyone out there that subscribes to this service that is not affiliated with this program in any way that can assure me this is a highly profitable service?
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This report was posted on Ripoff Report on 10/26/2009 12:28 PM and is a permanent record located here: ripoffreport/reports/diversified-trading-strategies-chuck-hughes-advisory/carlsbad-california-92009/diversified-trading-strategies-chuck-hughes-advisory-all-hype-no-action-carlsbad-cali-515030. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year. Ripoff Report has an exclusive license to this report. It may not be copied without the written permission of Ripoff Report. READ: Foreign websites steal our content.
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Comment for Chris Borgman of DTS.
AUTHOR: Larry Horning - (USA)
SUBMITTED: Friday, December 31, 2010.
POSTED: Friday, December 31, 2010.
"I have more than 24 years of trading experience and I have also posted copies of my tax returns and brokerage statements showing my long term track record on my website ChuckHughes. Log on to the home page of ChuckHughes and copies of these tax returns and brokerage statements are available in a PDF file. I think it is important for you to verify the actual track record for a program that you are considering purchasing. Remember that anyone with a computer and historical price data can produce fantastic hypothetical profit results. The real question is: How does the program perform in real time without the benefit of hindsight? The home page on my website also contains a link to my blog. My blog contains updated profit performance for my trading strategies and discusses the best trading strategies to use for current market conditions. Feel free to contact me any time if you have questions about my trading strategies. I look forward to hearing from you! Best Regards, Chuck Hughes".
In regards to the aforementioned quote from Chuck Hughes which was utilized in your response, where he welcomes questions about his trading strategies. Being a member of one of his many programs for a few months I can accurately state that I have submitted many questions concerning a particular strategie and so far he has refused to respond with answers to the majority of my submissions, I guess he believes silence is golden. I am now in the process of publishing these unanswered questions in RipoffReport, perhaps he will respond here, I seriously doubt that, I believe he will not answer any difficult submissions.
Please contact me
#2 Author of original report.
COMPLETELY INCOMPETENT, A TOTAL LOSER.
AUTHOR: BrightLight - (USA)
SUBMITTED: Wednesday, February 10, 2010.
POSTED: Wednesday, February 10, 2010.
It's been 4-1/2 months now with the GPS Advisory "service." Is it a service to lose your money and charge you $5,000 to do it as well? Hey, anybody out there that wants to send ME $5,000, I can lose you money just as well as Chuck Hughes.
Since starting this "service" he has recommended 41 round-trip trades in my account losing me $2,000. Yesterday, I opened my account at the brokerage to check on it, and page long listing of the former trades he had put on were sold out and replaced by one spread trade. When I called Diversified, who sold me this program, they said, "You have only been in the program 4-1/2 months. You have to wait until you are into the program for 6 months to see a SPIKE in your gains." Huh? 41 trades at a loss and now he has one spread trade on, that is one, 1, like the next number up after zero, and I'm supposed to see a SPIKE in my gains? Well, first this spike will have to take care of the loss, and then they can start thinking about a gain.
Run like a rabbit away from Chuck Hughes, GPS Advisory. He'll tell you he has so much experience, he is soooo profitable, he will amaze you with your gains, and he will dazzle you with delight. That is a joke with your money. He makes his profit selling you the program.
My Experience.
AUTHOR: Rocky - (United States of America)
SUBMITTED: Wednesday, November 11, 2009.
POSTED: Wednesday, November 11, 2009.
I've been a customer of two Chuck Hughes programs, the MVP and the GPS program which I purchased through Diversified Trading. I've been in the MVP program since August of 2008 and the GPS program since October 2008.
#4 REBUTTAL Individual responds.
The Reality of the Situation.
AUTHOR: Chris B. - (USA)
SUBMITTED: Wednesday, October 28, 2009.
POSTED: Wednesday, October 28, 2009.
Hello, my name is Chris Borgman and I am a project manager at DTS. I want to address the things Mrs. Olson (BrightLight from Wilmette IL), has posted. Mrs. Olson called my company on Aug., 25th 2009 and we had a few very good conversations about some of the traders that we represent. After showing Mrs. Olson the returns and performance information, she started her own due diligence process. Once she felt comfortable she chose to subscribe to Mr. Hughes' options trading program on Sept., 11th 2009. Like every potential investor I speak with about this particular trading program, I informed Mrs. Olson that Mr. Hughes holds his option trades on average for 3 or more months (short term trades). I also informed her not to expect to see any significant returns at all until the options trades mature. In my own words "You have to be able to withstand the time it takes for these options to come into fruition". I showed Mrs. Olson the proprietary members website where Mr. Hughes posts every single trade he has taken and closed, including both winning and losing trades in an effort to provide full transparency. This record of trades shows when he got in, the symbol, at what price, when he got out, at what price, and the profit or loss per position. I certainly provided Mrs. Olson with every tool available to help an investor make a rational and informed decision.
As any serious trader/investor would know, you cannot properly judge a trader or methodology, (especially a program that holds positions for an average of 3 months) within the first 30 days. You certainly cannot take a few closed positions within that time, while ignoring your open positions, and then use that figure to determine your annual return. Armed with the knowledge of the time it takes for this program to show the advertised returns, and the fact that Mrs. Olson even claims she has seen a profit in her first 30 days, frankly I'm at a loss as to why this is on Ripoff Report at all. Upon speaking with my CEO, what Mrs. Olson failed to divulge (among other things) is what her profit or loss (based on other clients that enrolled about the same time their open positions are in profit, so I assume Mrs. Olson's account is as well) was in open positions at the time.
The following is Mr. Hughes' own invitation to verify his returns for yourself.
"I have more than 24 years of trading experience and I have also posted copies of my tax returns and brokerage statements showing my long term track record on my website ChuckHughes. Log on to the home page of ChuckHughes and copies of these tax returns and brokerage statements are available in a PDF file. I think it is important for you to verify the actual track record for a program that you are considering purchasing. Remember that anyone with a computer and historical price data can produce fantastic hypothetical profit results. The real question is: How does the program perform in real time without the benefit of hindsight? The home page on my website also contains a link to my blog. My blog contains updated profit performance for my trading strategies and discusses the best trading strategies to use for current market conditions. Feel free to contact me any time if you have questions about my trading strategies. I look forward to hearing from you! Best Regards, Chuck Hughes".
I am more than happy to speak with anyone regarding this or any of our other trader's programs and how they work. I have many very satisfied clients that are willing to talk with potential clients. I will also provide real, live, verifiable brokerage account statements from any of our participating clients. I am sure that once Mrs. Olson has been trading the system for a reasonable amount of time and is enjoying the same profit as the rest of our clients, she will be willing to share her account statement with everyone as well.
877-872-3351 ext 215.
760-444-1445 my direct line.
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