Our Investment Strategies

An Investment Philosophy Proven by Decades of Research

An Investment Philosophy Proven by Decades of Research

Methodology

The Money Pouch Investment Methodology

Our Approach to Modern Portfolio Theory

The Money Pouch offers sophisticated automated investment management & advice without the hassle, high fees, or high account minimums that hedge funds charge.

 

Asset Allocation

The first step in our methodology is to identify a broad set of diversified asset classes to serve as the building blocks for our portfolios. Then we group the ETFs into three different types of clusters, bonds, equities and alternatives, e.g. gold. Then we apply a dual momentum strategy which uses absolute and relative momentum to choose the optimum mix of ETFs depending on market conditions. Momentum strategies have been around for over 200 years and there is a wealth of evidence to their efficacy in many different types of markets. It may offer superior returns than using the Minimum Variance Optimisation strategy that most roboadvisers employ.

 

Selecting the Right Portfolio

The Money Pouch invests your monies using cost effective, index-based Exchange Traded Funds (ETFs) for each asset class such as stocks, bonds or commodities. We periodically review the entire universe of ETFs to identify the most appropriate for each of the recommended asset classes. We then look for ETFs with the lowest costs, tracking errors, best risk/reward ratio and best market liquidity.

 

Identifying Your Risk Appetite

Understanding your tolerance to risk is paramount. Many investors overestimate the amount of risk they are willing to take. It is better to use a more statistical approach. This is achieved by asking clients to answer a series of risk questions to pinpoint an investor’s risk level in order to identify the likely best asset allocation for his or her needs. Rather than asking the typical 25 questions asked by most financial advisors to identify an individual’s risk tolerance, The Money Pouch have used behavioural economics to simplify the risk identification process, so only a few questions need to be asked to set up the appropriate portfolio for each client.

 

Rebalancing and Monitoring

Finally, we constantly monitor our clients’ portfolios and rebalance the stock/bond ETF mix frequently in order to optimise returns for clients' identified level of risk. We use targeted sniper trading algorithms to execute trades in the markets. In this way, we try to get the best possible price for a client when opening or closing a position. Click here to learn more about rebalancing.

 

Rigorous Investment Research

As part of our commitment to transparency, we’ve provided the following white papers that explain our investment methodology in more detail.

Please click here to find out more about our conservative, balanced and adventurous ETF strategies.

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