Balanced Investment Philosophy
The tactical asset allocation model used for the Absolute Return Balanced accounts was originally developed by William F. Sharpe. The difference in this approach from others is that the expected return for stocks is based on projected earnings rather than historical returns. As earnings estimates change with the economic cycle and as the price of stock market changes, the expected return of the stock market also changes. This expected return is then evaluated with the more stable investments of bonds and cash equivalent investments. The model calculates the optimal mix at the time based on current interest rates and the historical volatility of the capital markets. The inception date of this product is 10/1/1999. Although the asset allocation model has a much longer history, the stock selection process used here began on this date.