ProActive‘s Core-Satellite Approach to Investing

At ProActive Investment Management, we apply a Core-Satellite approach to portfolio management. The goal is to generate competitive returns while assuming reasonable levels of risk for investors.

The Core component is comprised of bond ladders. Depending on the financial needs and reward-to-risk adjusted goals of the client, we will construct bond ladders that are comprised of individual investment grade bonds (Treasuries, Agencies, Municipal and Corporate debt) and brokerage issued CDs. In addition to individual bond holdings, bond ladders may be constructed with fixed income ETFs (investment grade as well as high yield).

The Satellite component is comprised of equity ETFs that emphasize GARP (growth at a reasonable price), stable free cash flow, and low volatility factors. Almost half of our equity ETFs have international (non-U.S.) exposure. There are also smaller allocations to fixed income and commodity sensitive ETFs. We refer to the satellite part of the portfolio as WMB13.

WMB13 has ON/OFF switches. When asset class components are breaking down we exit them and move to cash. Thus, the U.S. equity, non-U.S. equity, fixed income and commodity sensitive block components each have ON/OFF dimmer switches. There is also an overriding ON/OFF switch for the overall WMB13 satellite allocation. Experience shows that this approach is among the best ways to preserve capital during volatile market periods.

We can also run a passive version of WMB13 if the client so desires. This can make sense if the core bond ladder allocation is at least 70% of the portfolio.

Combining bond ladders with tactical satellite programs gives investors a foundation for income as well as growth potential with much less risk.

Focus on Keeping Expenses Low

We try hard to reduce expenses and pass these savings on to our investors. We accomplish this by using the lowest cost index funds offered by Vanguard, State Street, Blackrock (iShares) and Invesco. We avoid using star mutual fund manager programs with higher expense fees.

ProActive Investment Management runs its tactical models through Interactive Brokers, our preferred brokerage firm for trade execution and performance reporting. In addition, IB also has among the lowest margin rates in the business.

Interactive Brokers LLC is a registered Broker-Dealer, Futures Commission Merchant and Forex Dealer Member, regulated by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), and is a member of the Financial Industry Regulatory Authority (FINRA) and several other self-regulatory organizations. Interactive Brokers does not endorse or recommend any introducing brokers, third-party financial advisors or hedge funds, including Proactive Investment Management LLC. Interactive Brokers provides execution and clearing services to customers. None of the information contained herein constitutes a recommendation, offer, or solicitation of an offer by Interactive Brokers to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Interactive Brokers makes no representation, and assumes no liability to the accuracy or completeness of the information provided on this website.

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