Alpha Model

Our Alpha Model is designed for long-term investors who seek a cost-effective, diversified portfolio that systematically applies momentum-based factors in pursuit of risk-adjusted results. It blends passive index exposure with active positioning based on systematic relative-strength indicators, while maintaining disciplined risk controls by periodically rebalancing between equity and fixed income allocations.

What is Momentum Investing?

Momentum factor investing is a systematic investment strategy within the broader framework of factor investing, which targets specific drivers of returns beyond broad market exposure. It exploits the empirical tendency for assets (typically stocks) that have recently performed well--know as "winners"--to continue outperforming in the near term, while "losers" continue to underperform. This persistence of trends forms the core premise, often summarized as "buy high, sell higher" rather than the traditional value approach of "buy low, sell high." [1][2] (For additional information, please read the following disclosures listed below).

Key Features:

1. Core Index Exposure:
   • Prioritizes low-cost, broad-based ETFs to provide core market exposure, typically tracking major benchmarks such as the S&P 500.
   • Offers broad diversification across major asset classes to reduce idiosyncratic (company-specific) risk while remaining aligned with overall market returns.
2. Momentum-Based Positioning:
   • Allocates to equities demonstrating positive momentum characteristics identified through quantitative screening.
   • Seeks to achieve performance alpha that may differ from the S&P 500 by emphasizing momentum and relative-strength factors within a diversified portfolio.
3. Conservative Fixed Income Allocation:
   • Includes investment-grade bonds to provide stability, reduce equity market volatility, and support income needs.
   • Focuses on investment-grade fixed-income instruments with yields above cash equivalents, while managing—though not eliminating—credit and interest-rate risk.
4. Customizable Risk Profiles:
   • Available in six risk levels—from Conservative to Aggressive Growth—each with a different equity-to-fixed income allocation.
   • Enables investors to align their portfolio’s risk level with personal tolerance, investment horizon, and financial objectives.

Potential Benefits

• Cost Efficiency: Emphasizes low-fee ETFs to help Manage overall expenses and potentially improve after-tax efficiency.
• Differentiated Exposure: Momentum exposure seeks to provide differentiated return characteristics compared with broad benchmarks over time.
• Risk Management: The fixed-income allocation is intended to help moderate volatility but cannot prevent losses during market downturns.
• Flexibility: Six distinct risk profiles allow for personalized investment alignment.

Key Considerations / Risks

• Momentum Strategy Risks: Momentum-based approaches may underperform during market corrections, trend reversals, or highly volatile periods.
• Interest Rate Risk: Fixed income positions are subject to price declines when interest rates rise.
• Rebalancing Requirements & Risk: Ongoing adjustments are necessary to maintain investors' risk tolerance target allocation and the models momentum tilt. However, periodic adjustments may trigger transaction costs and tax consequences.
• Long-Term Focus: The strategy is best suited for investors with a long-term investment horizon who allow systematic momentum factors to evolve.
• Model Risk: Quantitative models rely on historical data and assumptions that may not predict future market conditions.