Many investment firms have developed processes they consider proprietary. Even so, many investors and their advisors still want to know exactly how Niemann goes about managing money.
So while certain details that comprise our competitive edge cannot be revealed, we're proud to share—step by step—how we apply our process during a typical cycle of analysis.
1. Set the Universe—Niemann Analytics starts with a broad universe of mutual funds and ETFS, and applies our proprietary process to establish a "consideration set" of multiple asset classes for each of our strategies.
2. Assign risk numbers—We quantify a "risk number" (the standard deviation of monthly return) for each investment choice.
a.
Greater up-and-down movement, or volatility, results in a higher risk number. Lower risk numbers indicate less volatility.
b.
The industry refers to this process as "quantifying risk as the standard deviation of return."
3. Evaluate risk/return to rank each investment—We strive to be invested in the strongest group of mutual funds at any given time by ranking them every day in terms of where we can achieve the best returns with the least risk.
a.
To accomplish this, we evaluate risk and return components over short-intermediate-and long-term time horizons to determine where the most attractive opportunities exist.
b.
A higher ranking is assigned to those funds showing improvement over multiple time frames, while funds that under-perform are reduced in rank.
c.
We then position client assets according to which funds are at the top of their rankings, and are outperforming their peers.
4. Evaluate overall market health—Our analytics evaluate the overall health of the equity markets, on a macro level, based on trend analysis, market breadth, volume, technical factors and interest rates.
a.
Our goal is to gauge the market's health by identifying and confirming the trends at work, specifically to determine how much we want to be invested versus how much we want to allocate to cash as a defensive measure within those strategies offering that feature.
b.
The factors we consider include price history of market averages, the number of issues and/or sectors advancing or declining each day, the number of issues achieving yearly highs or lows, and a measurement of market sentiment.
5. Track money flow—As both institutional and individual investors move their money among various asset classes, the relative value of each asset class fluctuates up and down.
a.
Our daily analysis of market data—steps 2, 3 and 4 above—seeks to determine where money is moving and subsequently position client accounts accordingly.
How does Niemann decide when to buy and when to sell?
Relative to the performance of the rest of the market, we seek to identify those "themes" with the most attractive risk/reward ratios.
When we identify outsized gains with relatively low risk, we buy. And we stay in that investment as long as that situation exists.
Once that position begins to deteriorate and we confirm the downward trend, we'll look to sell it.
Consistency Counts
Within any system of money management, consistency is crucial. The process is only as good as the universal application of that consistent approach.
That's why at Niemann, we believe the
consistent application of our methodology is vital to our success, and yours. And that's why we execute the same steps in the process, for the same reasons,
every day.
We believe the results speak for themselves.
For more info see:
The Value of Tactical Management.
