The Dynamic Asset Allocation Program

WHAT IS DYNAMIC ASSET ALLOCATION?

The AFC Asset Management Services, Inc. (AFC) investment program, called Dynamic Asset Allocation, seeks to systematically balance portfolio risk and return through naturally occurring investment cycles (i.e. through "up" markets and "down" markets).

At AFC, we believe that holding an asset class at all times and at any price is neither advisable nor prudent. This differentiates us from those who practice a “buy-and-hold” strategy. We feel the power of compounding when applied to consistent investment returns is, very simply, a far superior investment philosophy. Considering the hypothetical portfolio options in the following table, which would you prefer? A hypothetical $100,000 investment in portfolios A, B, C, and D above grew to $138,240 while portfolio E grew to $146,410 over 4 years. This is nearly a 6% difference with less volatility. The primary goal of Dynamic Asset Allocation is capital preservation. We recognize that a 20% loss means an investor must earn a 25% return just to break even – a challenge in any market environment.

Our philosophy is based principally on identifying the "primary" trend of distinct asset classes. For example, an expected period of declining interest rates might suggest over-weighting bond mutual funds. Similarly, an environment of low stock valuations and "pent-up" consumer demand might suggest investing a larger portion in equity mutual funds. AFC focuses on identifying investments with intermediate- to longer-time horizons (e.g., 6 months to multiple years).

Adhering to the philosophy of Dynamic Asset Allocation does not result in AFC avoiding every short- or intermediate-term market decline, nor does it result in AFC participating in every short- or intermediate-term market advance. Rather, applying Dynamic Asset Allocation over the long term leads us to a critical assessment of significant underlying market trends. These trends may continue for months or years.

By identifying the beginning of a new trend or the end of an existing trend in an asset class soon after it occurs, AFC intends to preserve and grow our client’s capital by reallocating investment dollars to those asset classes that we feel the potential return is justified by the potential risk and away from those asset classes where we feel it is not. Executing this strategy of investing with the "primary" trend has the effect of keeping trading into and out of asset classes to a minimum. The following graphic illustrates this concept as it might be applied to only two different asset classes. Dynamic Asset Allocation is designed to position us to take advantage of the way things are, not the way we would like them to be. Executing our Dynamic Asset Allocation philosophy involves AFC’s proprietary models, which have been developed over more than two decades, together with extensive reading, research, and experience. Its implementation infuses discipline and objectivity into the decision making process for the client’s benefit.

We offer three different portfolios for our Dynamic Asset Allocation clients: the "Conservative" Portfolio is for clients who choose the conservation of capital as their primary goal with goal of growth secondary; the "Moderate" Portfolio is for clients who consider the growth of principle over the long term to be their primary goal with conservation of capital secondary; the "Aggressive" Portfolio is for clients seeking to maximize their gains with the commensurate increase in risk and volatility. Please refer to the Investment Policy Statement for additional information.



Dynamic Asset Allocation is an investment philosophy appropriate for all financial and economic conditions. It recognizes that the key to long-term investing success is achieved through the combination of preservation of capital (reduced losses) and consistent returns (reduced volatility).

The hypothetical investment results are for illustrative purposes only and should not be deemed a representation of past or future results. Actual investment results may be more or less than those shown. This does not represent any specific product or service.
Consistency is strived for but neither Dynamic Asset Allocation nor any other system can guarantee consistent returns.