This story was originally published in March 2012.
In hockey, as in portfolio management, offence is not always the best defence. A balanced two-way capability is usually most effective.
Constructing a portfolio, like drafting and coaching a hockey team, demands a fundamental understanding of what it takes to win. Portfolios built strictly to maximize gains are akin to lineups consisting of five forwards.
Any coach knows that’s risky. Investment advisors could learn something from hockey tactics, particularly when facing big volatile markets that can slam any game plan into the boards.
Getting the right lineup on the ice at the right time is a coach’s primary job. Here are two ideas to help exploit game situations and manage tactically for clients.
Battle for control
If the puck is in the neutral zone and control is at issue — trendless market, lacklustre economy — a balanced attack with a defensive emphasis may be suitable.
One strategy involves a 1-2-2 with one forechecking forward, two supporting forwards and two defensive players back. This approach was popular with Jacques Lemaire when he coached the Wild and Devils.
Diversified exposure to global and international economic growth is a good objective for the forechecking forward position. The support can be broad Canadian and U.S. equity exposure (see “1-2-2 Forecheck,” below).
1-2-2 Forecheck: Portfolio Strategy A
|Forechecking forward||Supporting forwards||Defencemen|
|iShares MSCI World (XWD)||iShares S&P/TSX Capped Composite (XIC)||Claymore 1-to-10 year Laddered Government Bond (CLG)|
|Vanguard MSCI EAFE (VEE)||Horizons S&P/TSX 60 (HXT)||Vanguard Canadian Aggregate Bond (VAB)|
|BMO International Equity (ZDM)||iShares S&P/TSX 60 Index (XIU)||iShares DEX Universe Bond (XBB)|
|iShares MSCI EAFE (XIN)||BMO Dow Jones Canada Titans (ZCN)||Claymore 1-to-5-year Laddered Corporate Bond (CBO)|
|Vanguard MSCI US Broad Market (VUS)||Powershares 1-to-5-year Laddered Investment Grade Corp. (PSB)|