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EFT Strategist
Profits & Safety in Any Market Cycle

April 5, 2022

As market conditions continue to shift, with large-cap U.S. stocks resuming an uptrend in the past two weeks, we are once again making some changes within the tactical Undiscovered Portfolio.

How To Use These Portfolios
Today, I want to address some questions about the Cabot ETF Strategist.

I’ve had a few readers ask about trades.

The ETF Strategist features two categories of portfolios.

1. The first category is Asset Allocation.

Under that category, you will find:

  • Aggressive Allocation
  • Moderate Allocation
  • Conservative Allocation

These allocations are designed to replicate how professional asset managers invest client money to meet long-term goals, such as retirement.

I want to clarify something: Unlike stock portfolios that you may commonly see with other Cabot products, that require frequent trading, these allocations trade perhaps every eight weeks or so. As such, you won’t see too many alerts.

Your ideal asset allocation is the mix of investments, from most aggressive to least aggressive, that will earn the total return over time that you need.

The mix includes stocks, bonds, and cash or money market securities. The percentage of your portfolio that you devote to each depends on your time frame and risk tolerance.

It is NOT active trading.

It is NOT tracking the return of individual components and trading out the ones that perform badly using stops.

However, on the flip side, don’t get complacent and treat these portfolios as long-term “buy and hold,” or “set and forget” investments.

Asset allocation is an investment philosophy with a track record of smoothing your returns, minimizing volatility, but still helping you capture gains from various global regions and market capitalizations.

So don’t view these portfolios the way you would a stock-trading letter. Think of these as your allocations earmarked for the long term. No, these are not “prudent.” They are designed to incorporate market risk while simultaneously preserving your capital.

2. The second category is the “Undiscovered” portfolio.

This is designed to be more tactical, which means it’s more tailored to short-term market movements. This is a place where you will see more frequent trades.

Be on the lookout for trade alerts when it comes to these portfolios, which lean more heavily on short- and medium-term technical indicators.

How To Use These Portfolios
I’ve gotten questions about how much to allocate.

That’s up to you.

But here’s an example:

Say you have $100,000 to allocate. You are concerned about retirement and want the bulk of your assets invested in a manner consistent with your risk tolerance and time horizon.

However, you’d also like to take a little more risk with a small portion of your portfolio.

In that case, you can, for example, invest $90,000 into one of the strategic portfolios, and the remaining $10,000 into Undiscovered, to take advantage of short-term market movements.

But there are other ways you could do this: For example, if you have money with a financial advisor earmarked for the long term, and you want some discretionary dollars going into riskier assets, then perhaps you only use the Undiscovered portfolio.

This is your choice. I can’t tell you precisely how to divide up your available pot of money, but as you see, you have choices in how you can approach these portfolios.

Hope that helps, and as always, don’t hesitate to reach out with questions.