While our stated goal is to possibly reduce downside exposure to the broad markets and to attempt to produce positive returns on an annual basis, there still remains the possibility of losing capital. SGS understands the inherent risks of overweighting volatile asset classes, such as commodities, REITs, international equities, U.S. equities, emerging market country specific equities, inflation-protected securities, high yield bonds, as well as international and emerging market bonds. Therefore, our strategies are intended for long-term investors.
Sterling Global Strategies is a strong believer that high alpha may be best achieved through asset class trend analysis coupled with having the ability to invest 100% of capital in cash. Our intermediate-term trend analysis helps indicate which asset classes may be entrenched in extended bull markets and which may be experiencing bear markets. The data is then further evaluated to eliminate the asset classes predicted to be declining, and then to overweight investing in those asset classes that display an upward trend. Once these asset classes are determined, our portfolios are constructed by investing in the corresponding class of exchange traded funds (ETFs) and/or mutual funds.
“Creating Wealth by Preserving Capital” is a description of our investment methodology and the stated goal of Sterling Global Strategies. What makes SGS unique is our process that includes cash as an asset class. A large number of mutual funds, ETFs, and asset managers stay fully invested during bear markets, but we believe we offer an alternative with our tactical strategies. It is our belief conceptually that by limiting downside losses during bear markets, outperformance over full market cycles are more likely. However, there may be periods when our strategies are in cash and the broad market reverses course and moves higher. This will generally only take place during market corrections. During true bear markets our strategies are designed to go to cash. Investors should not assume this happens immediately. Investors can lose money during the beginning stages of bear markets. It is our stated goal to preserve as much capital as possible during bear markets, as we believe preserving capital is the most important function of creating wealth.