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Portfolio Review
Equity Portfolio
Our equity investment strategies are based on buying strength and selling weakness. We use rule-based models that we have developed to analyze market data, and multiple asset classes to determine what to buy, when to buy, what to sell and when to sell. The approach we take does not require us to predict market direction or what event(s) are bullish or bearish for the market. Our approach is one that uses technical and fundamental analysis to objectively interpret the probability of risk versus reward for our client’s assets.
At NICH Capital Partners, Inc. We believe that risk management is every bit as important as investment selection. In addition to fundamental and technical analysis we seek to reduce risk by diversifying equity portfolios among a maximum of 10 to 20 individual stocks, taking care to limit concentration in any one sector or industry. Because our goal is to maximize an absolute return strategy, we will use liquid assets in times when the markets are extremely volatile or our research determines that the rewards to risk ratio is not in our favor.
At NICH Capital Partners, Inc. We utilize clearly defined sell criteria to realize profits and protect against significant losses. While we are longer-term investors we believe a disciplined sell criteria are a critical component of successful portfolio management. We will sell any position where there is a significant, negative change in the company’s outlook, or the overall markets turn negative and the downside risk is greater than potential growth.
Fixed Income Portfolio
Because bonds behave independently from equities, adding fixed income investments to a portfolio can improve its overall diversification. Fixed income securities expand the opportunity of investors to participate in the performance of capital markets and provide a more reliable source of income than other asset classes.
At NICH Capital Partners, LLC we use fixed income securities as a primary source for portfolio stability, safety, and income where desired. Our focus and criteria with fixed income investing is credit risk and diversification. We look to build a high quality portfolio based on in-depth research of municipalities and corporations that issue debt.
Relative performance in fixed income is largely driven by two dimensions: bond maturity and credit quality. Bonds that mature farther in the future are subject to the risk of unexpected changes in interest rates. Bonds with lower credit quality are subject to the risk of default. Extending bond maturities and reducing credit quality increases potential returns.
Since it is impossible to predict what will happen with interest rates in the future, we diversify broadly and use a “variable maturity” or ladder approach in most of our portfolios. To maximize expected returns, we choose shorter maturities in flat or inverted yield curve environments and longer maturities in upwardly sloped curves. Maturities are shifted in response to changes in the current yield curve.
