Cumberland Advisors Market Commentary –  Human Emotions, Structure of Strategy, and Diversification of Risk

Author: David R. Kotok, Post Date: June 10, 2020
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Below is a 20 year comparison of MDY (the S&P 400 midcap index) and SPY (the S&P 500 largecap index). The 20 year relative performance gap is obvious. Please look carefully at those interim periods when MDY violently outperformed SPY and also look at reversals.


20 year comparison of MDY (the S&P 400 midcap index) and SPY (the S&P 500 largecap index)
 

The typical investment question is “what happens next?”

One of Cumberland’s very long term successful strategy approaches is based on not knowing the answer to this question.  That strategy is based on the human inability to predict the future.

The strategy has a basic 40% weight in actively managed investment grade bonds (we use municipal tax free for individuals) and investment grade taxable bonds for ERISA and charitable accounts). The bonds are continuously surveilled for credit worthiness and market trading opportunities. This is NOT a buy bonds and hold forever approach. Active means active.

60% is deployed on a formulaic structure in SPY and MDY. The formula attempts to position the cheaper area as relative prices change.

The entire 100% is under regular review and rebalance occurs when realignment makes sense.   This is a low cost and steady return approach. We’ve been doing it for many years. We have GIPS verification results starting in 2012.

The structure of the strategy reduces the human emotional input and it emphasizes diversification of risk.  Please email me if you would like to see information.

Please be safe and careful.

David R. Kotok
Chairman of the Board & Chief Investment Officer
Email | Bio


Cumberland Advisors claims compliance with the Global Investment Performance Standards (GIPS®). Clients and prospective clients may obtain a copy of the GIPS presentation for any of our strategies, or a listing of other composite descriptions by contacting Pam Scott, at 800-257-7013 ext. 341; or pam.scott@cumber.com.


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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.

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Cumberland Advisors® is registered with the SEC under the Investment Advisers Act of 1940. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. Such an offer can only be made in the states where Cumberland Advisors is either registered or is a Notice Filer or where an exemption from such registration or filing is available. New accounts will not be accepted unless and until all local regulations have been satisfied. This presentation does not purport to be a complete description of our performance or investment services. Please feel free to forward our commentaries (with proper attribution) to others who may be interested. It is not our intention to state or imply in any manner that past results and profitability is an indication of future performance. All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed.
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