Why Confident Strategies® doesn’t make stock recommendations

Our Model Portfolio Recommendations
Include Mutual Funds, Not Stocks

We provide Model Portfolio recommendations that include investments in various types of mutual funds and other kinds of diversified funds. For example, our recommendations include:

• Index Funds
• Mutual Funds
• Sector Funds
• Exchange Traded Funds
• Leveraged Index Funds

But why not make individual stock recommendations?

To properly diversify, you need a large number of stocks in your portfolio.

Mutual funds provide a significant safety factor when compared with owning a handful of your investment advisor’s stock recommendations. You would need to own a large number of stocks to reduce your overall risk to a level equivalent with a diversified stock market mutual fund. Since our recommendations include only diversified types of funds, you will never be subject to the extra risk involved with owning an individual stock.

It’s much easier to be nimble in the stock market when you own funds, not stocks.

Our Model Portfolio recommendations ... based upon market timing logic ... react quickly to changing stock market conditions. Our recommendations change not only in response to the overall stock market, but also to changes in the more localized conditions affecting individual sectors.

• Most of the benefit from our strategies comes from quickly responding to market changes.

So we need to be nimble in our recommendations. It's difficult to be nimble (and precise about your portfolio asset allocation) when you’re working with a large stock portfolio -- there would be just too many transactions to do. At the very least, it would be very difficult just to control the transaction costs required if you tried to follow our system’s recommendations with individual stock investments. 

• It's easy to be nimble and implement our recommendations with mutual funds (i.e., index funds or exchange traded funds) because it usually requires making only one simple transaction, perhaps once overy month or two.

 

Stock picking is a rare skill.

Being a consistently effective stock picker is a special skill. The research required can involve hiring a trained staff of analysts. Even stock brokers, who have armies of research analysts behind them, tend to perform no better on average because of the institutional pressures in brokerage firms to sell, sell, sell.  There are precious few investment advisors who pick stocks consistently well and we are also not among them.

• What we do well is use computer technology to identify stock market trends and manage the overall risk of a Model Portfolio.

Our trend following technology is most effectively applied to stock market indexes and industry sector indexes which are broadly diversified, tending to smooth out the high levels of volatility that are usually found in an individual stock.  By making recommendations in diversified funds, we avoid altogether the inherent difficultly of picking stocks. And we are not disadvantaged by taking this approach.

• You can count on a single hand the number of stock-picking fund managers who have consistently beat the market over a longer period of years (such as 10 or 15 years).

By contrast, our index fund-based recommendations, driven by an effective long term market timing model and an active asset allocation approach, can beat the market by a huge amount over the long term.

So, no thank you ... we don’t make individual stock recommendations.