9600 Blackwell Rd., Suite 101Main: 301-294-7500
Rockville, MD 20850-3670Fax: 301-294-7504
Research Financial Strategies (RFS) is a private wealth management firm that was established in 1991 to provide fee based investment advice. We are a Registered Investment Advisor (RIA) with the Securities Exchange Commission (SEC). RFS specializes in providing investment advice using a proprietary investment methodology that combines fundamental and technical analysis to maximize gains and minimize losses.
Currently RFS has over $450 Million under management serving clients in 45 states. Jack Reutemann (CEO & Founder) is well known nationally as a speaker and money management expert, and is a frequent guest on CNBC, Fox News, and other media. In the financial services industry, Jack is well known as the co-founder and co-instructor of "No More Pies" ( a 2 day course on teaching technical analysis & risk management to other advisors.
James C.Musgrave, who has over fifteen years experience as a wealth advisor, specializes in retirement planning, money management and company retirement plansjoined RFS in January 2012. He frequently gives seminars on technical analysis and retirement planning to federal employees, military personnel and corporations.
Whether saving for retirement or simply investing for the future, investors today cannot afford to stay 100% invested 100% of the time. There is too much at stake.
Bear Markets - The Facts:
A Bear Market is defined as a 20% DECLINE or greater in the S&P 500
16 bear markets have occurred since 1929
Bear markets begins on average every 4.8 years.
The average duration of a bear market is approximately 17 months.
The average time spent making up for market loss from a bear market is approximately 60 months.
*Source:
**The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index generally representative of the U.S. Stock Market, without regard to company size and cannot be invested into directly.
Below are the historical details on each bear market...
BEAR MARKET / DURATION / % DECLINE / TIME TO BREAK EVEN1 / September 1929 - June 1932 / 33 months / 86.70% / 302 months
2 / July 1933 - March 1935 / 20 months / 33.90% / 28 months
3 / March 1937 - March 1938 / 12 months / 54.50% / 107 months
4 / November 1938 - April 1942 / 41 months / 45.80% / 77 months
5 / May 1946 - March 1948 / 22 months / 28.10% / 49 months
6 / August 1956 - October 1957 / 14 months / 21.60% / 25 months
7 / December 1961 - June 1962 / 6 months / 28.00% / 22 months
8 / February 1966 - October 1966 / 8 months / 22.20% / 16 months
9 / November 1968 - May 1970 / 18 months / 36.10% / 39 months
10 / January 1973 - October 1974 / 21 months / 48.20% / 91 months
11 / November 1980 - August 1982 / 21 months / 27.10% / 25 months
12 / August 1987 - December 1987 / 3 months / 33.50% / 23 months
13 / July 1990 - October 1990 / 3 months / 19.90% / 7 months
14 / July 1998 - October 1998 / 3 months / 21.20% / 3 months
15 / March 2000 - October 2002 / 31 months / 49.10% / 87 months
16 / October 2007 - March 2009 / 17 months / 56.80% / 67 months
* Source: Dorsey Wright and Associates:
** Performance does not include reinvested dividend distributions.
Our Approach to Investing
A Paradigm Shift to Investing - The "When" Versus "What"
From 2000-2009 the S&P 500, NASDAQ, & DOW Indexes all produced negative returns for investors. There were two significant market corrections that led to the US stock market's poor performance - the Tech Wreck (Mar. 2000 - Oct. 2002) and the Great Recession (Oct. 2007 - Mar. 2009). Over 90% of investors lost money in either their retirement and/or private wealth accounts during this 10 year period. What is worse is many of them paid management fees and commissions. The chart depicted below illustrates the S&P 500 Index performance during this time period.
Research Financial Strategies cannot guarantee investment performance, but we can guarantee that there will be another stock market correction. Market corrections are the biggest threat to long term returns in the stock market. As an example the average American who invested 100% of their retirement in equities (i.e. stocks) in the last market correction lost approximately 50%. To recover requires a 100% return to get back to even. While it took only 17 months to lose 57% during the "Great Recession," today all investors who benchmark to the S&P 500 Index are still under water by as much as 3% 5 years later!
(As of 12/31/2012)
Research Financial Strategies provides our clients with a reproducible, non-emotional investment process using technical analysis to monitor market risk within the industries, sectors, and our actual investment decisions. It starts first with understanding our clients’ financial goals & needs and helping them plan for the future. Below is an overview of RFS's investment process.
Determining Investor Suitability
As investment advisors it is our fiduciary responsibility to make sure we understand each of our clients’ investment tolerance and risk profile. RFS has the unique capability to create unlimited customized asset allocation blends for our diverse client base.
Our Research Methodology: Simple Economics
Simply stated, we focus on price movements of securities, which are the ultimate determinant of supply and demand in the marketplace. When you cut through all the verbiage on Wall Street, what moves stock (and thus ETF) prices is supply and demand. It is nothing more than ECONOMICS 101.
We know why tomatoes in the winter don’t taste very good, don’t have a very long shelf life, and are expensive. The same forces that move prices in the supermarket move the stock market. When it’s all said and done, if there are more buyers than sellers, prices will move higher. If there are more sellers than buyers, prices will move lower. Therefore, analyzing the price action of a security over time can yield important information as to who is winning the battle for that security — supply or demand.
In addition to Fundamental Analysis, Research Financial Strategies uses a methodology or Technical Analysis called Point & Figure Charting, which has been around for over 100 years. One of the first proponents of the methodology was Charles Dow, the first editor of the Wall Street Journal. Charles Dow was a fundamentalist at heart, yet he understood the importance of the supply and demand relationship in any stock.
Fundamental Analysis vs. Technical Analysis
Basically, there are two types of securities analysis – fundamental analysis and technical analysis. A fundamental analyst tries to answer the question “What” to buy. A technical analyst tries to answer the question “When” to buy and just as importantly, “When” to sell. A technical analyst wants to find the trend of a chart – is it trending up or trending down. Is the stock outperforming the broad market? How high, or in some cases, how low can the stock go?
Unfortunately, there are very few on Wall Street who effectively combine the fundamentals with the technicals. In a sense, they’re playing the piano with only one had. While that may be a way to play a simple melody, you can play much better music if you play the piano with both hands. In fact, our game plan is grounded in this philosophy of combining the fundamentals with the technicals, or playing the piano with both hands.
Relative Strength
One of the most important tools in the Point & Figure method is relative strength. This unique tool measures the likelihood that a stock will outperform the base index, the S&P 500 Equal Weighted Index (SPXEWI). We can run relative strength comparisons to determine if “X” is better than “Y”. For example, is the S&P 500 outperforming Cash, or are Bonds outperforming Commodities?
In addition to measuring how a stock is likely to perform versus the market, we also measure each stock relative to a group of its peers. For example, how is Apple performing compared to Google? The goal of this relative strength chart is to pinpoint the “best in class”.
Relative Strength Analysis: Asset Classes
The purpose of our Dynamic Asset Level Investing (DALI) Report is to provide you with a streamlined dynamic snapshot of the financial landscape. Specifically, it aids you in investing your portfolio across all types of assets in various market environments by using relative strength to guide allocation. We use an RSbased matrix to determine which assets should be emphasized or overweighted, allowing you to tactically adapt and change as the market conditions change.
The Dynamic Asset Level Investing (DALI) evaluates six broad asset classes using an RS matrix comprised of a diversified universe that represents each asset class. We conduct an extensive RS wrestling match among all the representative securities, summarize the results on a daily basis, and then rank the asset classes from strongest to weakest based on their relative strength score or tally reading. For example, in the sample view below, Domestic Equities, International Equities and Fixed Income hold the top three spots. As a general rule, portfolios should be overweighted in the asset classes that hold the top spots, and underweighted in those asset classes with the lowest tally reading.
A Brief Summary
The last two recessions have proven very costly for millions of investors. Although the S&P 500 has recouped its losses from October 2007, many people’s portfolios have not.
The secret to outperforming the US equities market in the long run is to minimize losses to begin with. Our clients benefit from our sell-side discipline that moves money out of the market when the trend turns negative, thus protecting more of your principal. We re-enter the market in the strongest sectors when the trend turns positive. Traditional buy & hold asset allocation investment strategies may not lose as much value as the broad market during recessions, but they can still cost you plenty.
If you would like to learn more about our money management, we would be happy to schedule a phone call or meeting. Call Jim Musgrave at 301-588-0514 or email .
Investment Advice offered through Research Financial Strategies, a Registered Investment Advisor