3 DIMENSIONAL INVESTING
Solid returns, independent of the market, with less risk
Many funds chase high returns at the risk of principal. Other funds are so strongly correlated with the market, they leave investors with very little chance of performing well in a down market. At The Abernathy Group II, we believe that smart investments are three-dimensional: they simultaneously and consistently take into account strong risk reduction, market independence and returns.
To read more about our approach to each of these, please review the dimension below.
Solid Returns -
Returns: the amount of appreciation that assets
produce over a given amount of time.
Everyone wants large returns on their investments. Unfortunately, some funds advertise large returns without advertising the amount of risk it took to capture those returns. In a sense, this would be like comparing two doctors by only looking at one statistic. For instance, a cosmetic surgeon's 5% mortality rate is vastly different from the 30% mortality rate of an oncologist. The statistic is meaningless without all of the facts.
The same is true with returns. When deciding to invest, one must know who managed the fund and for how long, and how much risk it took to generate returns. Risk-adjusted returns offer a clear picture of how much money one stands to lose.
The Abernathy Group II is dedicated to creating a dependable, safe haven for your money to grow. Our funds consistently generate favorable returns over time, rather than infrequent returns that occasionally look nice on paper. Abernathy funds are always hedged, so investors can expect returns with much less risk.
Market Independence -
Market Independence: a fund’s ability to produce returns independent of downturns and upswings in the market.
Most funds follow the market. When the market is up, most funds are up, when the market is down, most funds are down, too. Quite frankly, anyone can follow the market. The Abernathy Group II sees things more clearly. Our portfolios strive to maintain independence of the market marked by a correlation considerably lower than most mutual funds. This is one of the reasons The Abernathy Group II has been recognized by Nelson's as one of the best money managers in the world seven times. That is true consistency and is possible only when you do not follow the crowd. This is how The Abernathy Group II stacks up against other prominent funds in market independence:
The Abernathy Group II -
The firm aims to keep portfolios largely uncorrelated to the S&P 500. For instance, an Abernathy Group portfolio, depending on the investor, might have only a 20% to 60% correlation with the market. In other words, much of The Abernathy Group's II returns are independent of the market.
Fidelity Magellan -
Maintains 95% or greater correlation with the market. In other words, less than 5% of Fidelity Magellan returns are independent of the market.
Why pay a management fee to simply follow the S&P 500?
We happen to like outperforming down markets. If you prefer to rely strongly on the market for your returns, an Abernathy Group II portfolio is not for you. Our investors, we like to say, are not a part of the crowd. We plan to keep it that way.
Risk Reduction -
Risk Reduction: the practice of reducing the probability of loss, or the magnitude of loss, while maintaining the ability to experience reasonable returns.
Most people look both ways before crossing the street, or throw on a coat at the first sign of winter, or buckle-up for a short ride down the block. Each action reduces risk. Yet, somehow, many people ignore this instinct when investing. The Abernathy Group II believes one of the three keys to intelligent investing is to reduce risk. We believe higher returns are generated when taking less risk, not more. Once you lose money, it takes much longer to make it up.
Of course, the best strategy is not to lose money in the first place. In other words, keep as little of your money at risk in order to generate returns. For instance, when given the choice between an 11% return and a 9% return, most would choose 11% without asking any questions. The higher return seems to be the obvious choice. But what if you knew that in order to get the 11% return, your fund manager put 200% of your capital at risk? And in order to generate the 9% return, other fund manager put only 25% of your capital at risk? To us, the 9% return is the obvious choice.
We believe our will investors benefit from consistent returns over time, and with significantly less risk than the overall market. The Abernathy Group II also seeks to reduce risk by limiting our own business and operation risk. The firm has had the same investment manager since inception.
If you are looking for a high-risk, explosive opportunity for your money, an Abernathy fund is not the fund for you. We believe less risk, not more, is the key to increasing an investor's net worth. The most important aspect of growing your net worth, over time, is by reducing risk.