How we build and manage portfolios

 


Portfolio management is one of the main services Prairie Capital Management offers its clients. We'd like to give you general understanding of how we build and manage our portfolios. We lay diversification and asset allocation as a foundation to all our portfolios. However, asset allocation and diversification alone do not assure or guarantee better performance than broad market, neither these factors eliminate the risk of investment losses. Therefore, in our attempts to beat the market and deliver our clients better long-term risk-adjusted results, we utilize the following three-step approach.

First step is to take advantage of economic cycles. There are four stages to a cycle: Early, Mid, Late and Recession. History shows that certain sectors indeed performed better than others under certain market conditions. For instance, interest rate sensitive industries do better during an early stage due to governmental attempts to fuel the economy by lowering interest rates. Sectors like consumer staples and health care are a better choice during recession because we all buy basic staples and address our medical needs even when economy isn't doing so well. Taking these factors in consideration, we've developed a list of sectorized securities that we use under different market conditions.

Next step is to answer the critical question: Where are we in the cycle? While there is no simple formula to that, by tracking a number of economic factors like Index of Leading Economic Indicators, Unemployment Data, Purchasing Managers Indexes, the yield curve and more, we implement tactical shifts in satellite sections of our portfolios attempting to capitalize on current economic conditions.

Lastly, we don't want anyone to take more risk than they feel comfortable with. Historically, fixed income securities have been less risky than equity securities. Considering this we utilize comprehensive fixed income strategy that addresses everchanging interest rate environment and smooths out long-term returns on fixed income portion of our portfolios.

If our three-step approach to portfolio management sounds like something you'd benefit from, please contact us. We'd love to chat with you about our practices and how we can serve you!

 


Different types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable.