When you feel pressured by outside forces or the need to adjust your investment portfolios quickly in response to every market blip, it's simple to get caught up in this trap. Still, we should ask ourselves if our investment portfolios now match what they were at the beginning of the year. If not, it might be time to give patience another thought.

Numbers hold sway in portfolio management, where performance metrics, especially historical ones, often dictate decisions. Yet, the reliability of real-world performance, especially in non-quantitative investments, is a question mark. Enter backtesting, a strategy simulation that shines in several ways. It provides a consistent data set, neutralizing external influences, unlike real-life numbers prone to fluctuations. Plus, with frequent fund manager changes, assessing real-life numbers can be tricky, but backtesting evaluates the strategy, not the manager. It lets you model diverse scenarios, stress-test strategies, and removes emotional biases.

Several key factors interact in a constant, dynamic dance in the vast realm of global finance. Bond prices, inflation, stock markets, and geopolitical events, particularly in the Middle East, are major players. Let's take a look at these relationships in more detail.

The relative strength approach to portfolio selection, rooted in momentum investing, is gaining traction among investment advisors for its potential to improve risk-adjusted returns. By comparing portfolio performances, advisors can identify and capitalize on existing momentum, ensuring assets are allocated to portfolios currently outperforming their peers or benchmarks. This strategy responds well to prevailing market trends, promoting better performance and ease of implementation. However, it’s not without downsides like high turnover, which may lead to increased transaction costs and tax implications. The balance of benefits against drawbacks warrants careful consideration in employing this approach.

Returns can be deceiving, especially in the short term, as they fluctuate dramatically over different 10-year periods. However, digging deeper reveals that standard deviation, a risk measure, tends to follow a more consistent path, making it a more reliable parameter in evaluating investments. As investment advisors, directing clients toward this stable metric rather than the fluctuating returns can foster investment strategies based on realistic expectations, laying the groundwork for a smoother, more predictable investment journey.

Interest rates play an important role in determining a company's economic direction and, by extension, its ability to service debts. As a result, dissecting the complex relationship between high interest rates and corporate defaults is critical. We will delve into the complexities of this relationship in this discussion, shedding light on how rising interest rates can potentially lead to an increase in corporate defaults.

Gold, silver, commodities, and the US dollar are all important asset classes that can provide information about the state of the economy and stock market. Understanding how these assets move and correlate allows us to gain insights into the economy's future health and potential stock market direction.

Asset allocation is akin to baking a cake, combining diverse investments like individual ingredients. Just as a cake needs all components, regardless of their individual taste, a portfolio needs all its assets for optimal performance. Evaluating based on individual assets can mislead, as omitting an underperforming investment might negatively impact long-term returns.

Upside and downside capture ratios offer valuable insights into how a portfolio performs during market upswings and downturns, respectively. By understanding and analyzing these ratios, investment advisors can evaluate risk management, performance, and construct portfolios that align with clients' goals.

With the addition of Skewness and Kurtosis, we're taking iQUANT's model factcards and Portfolio Optimizer to the next level. These sophisticated volatility metrics are critical for making informed investment decisions. Learn how they can help you better understand investment behavior.

It's simple to become engrossed in short-term trends and write off particular asset classes as a result of sporadic underperformance. Particularly recently, there has been skepticism toward bonds. Before completely ignoring bonds, investment advisors should take precautions.

We recognize the tendency to get caught up in the performance of individual stock (or ETF) picks within a strategy. However, we must transfer our attention to the wider picture - the process itself. The effectiveness of a strategy should not be measured just by the performance of its individual picks. In this blog post, we will discuss the significance of sticking to a process and accepting both winning and losing picks as a part of the plan. We will use Berkshire Hathaway as an example to demonstrate how even a highly successful investment can have underperformers while still achieving excellent long-term performance.

When using the iQ Portfolio Optimizer, it is important to keep in mind the "garbage in, garbage out" principle. Restricting the Optimizer to selecting investments based solely on a specific year’s returns (i.e. 2022) limits its true capabilities. This undermines the purpose of portfolio optimization, which seeks to create a diversified portfolio for long-term returns by considering long-term historical correlations.

“Investments often appear to decline right after I decide to invest in them” is a common observation made by investment advisors; however, this occurrence stems from the tendency to choose investments based on short-term outperformance, disregarding the fact that no investment rises indefinitely and generally experiences a temporary slowdown after a remarkable surge.