A Beginners Guide for DIY Investors The gap between Wall Street and Main Street started shrinking in the early 2000’s but has accelerated since Covid. What used to be the exclusive playground of hedge funds and institutional giants — blazing fast computers, complex trading systems, and algorithms, is now accessible to everyday investors with a decent internet connection, curiosity, and discipline. This shift is not only about access to new tools, but t’s also about a new way of thinking.  It is about replacing gut feelings with rules, replacing panic with process, and replacing “hunches” with historical data. Welcome to the world of algorithmic trading. For the DIY investor, algorithmic trading can seem intimidating: lines of code, statistics, probabilities, and AI bots. But the truth is, algorithmic trading is just a fancy term for something quite simple; it’s using predefined rules and data to decide when to buy or sell. This guide is for the self-directed investor who wants to start and understand what algorithmic trading really is, how it works, what tools are out there, the strategies that can be used, and whether it’s worth your time and money. Like all good things in investing, it’s not a magic bullet. But with the right mindset and risk management, it can be a valuable tool in your investing toolkit. What is Algorithmic Trading? Algorithmic trading is sometimes called algo trading or automated trading because of its use of computer programs to follow a set of instructions to place trades. These instructions can be as simple as “Buy when the price moves above the 200-day moving average” or as complex as multi-variable machine learning models reacting to real time market conditions. At its core, algorithmic trading replaces the manual trade, the time when you click “buy” or “sell” with a set of pre-programmed rules that do it for you. Think of it as an autonomous vehicle, but for your portfolio, as you navigate down your investing journey.    There are generally two types of algorithmic systems: Rules-based systems: These follow logical steps based on market data. If condition A occurs, then do action B. For example, if the stock moves above its 50-day moving average and volume spikes, buy. This is a very simple example. But as conditional loops become nested and multi variable, they all followed pre-defined steps. AI-driven systems: These use adaptive models and are often powered by machines, learning to find patterns in vast sets of financial data. They don’t just follow rules; they learn and adjust over time. Development in this area has been exploding since 2024 and is rapidly changing Common inputs used in algorithms include: Price trends Trading volume Volatility levels Timing of trades News sentiment Technical indicators like MACD or RSI Whether you’re working with a simple spreadsheet-based system or a sophisticated neural net, the goal remains the same: to make decisions based on data, not emotion. How Does Algorithmic Trading Work? You can think of algorithmic trading like a factory assembly line. It works in stages as each important step builds upon the prior steps to the final product and goal of a well-executed trade. Here’s a breakdown: 1. Market Data Ingestion The process begins by pulling in lots of data.  This includes both historical data (used for backtesting and model building) and real time market feeds that drive actual trade decisions. Market data includes prices, volumes, volatility, order book depth, and even news headlines or social sentiment. Some algorithms work off minute-by-minute data; others look at daily or weekly signals. The quality, speed, and reliability of this data stream can make or break your strategy. 2. Signal Generation This is the logic layer, where the sausage is made. It’s where your algorithmic trading strategies interpret the data and generate a buy or sell signal. This can be as simple as a moving average crossover, or as complex as a machine learning model evaluating dozens of variables. For example, a momentum strategy might buy a stock when its price rises faster than a specific threshold over a rolling period (say, 15% over 44 days)  and volume exceeds average. 3. Trade Execution Once a trade signal is triggered, the algorithm passes the output to the execution engine. Here, speed and precision matter. The trade is routed through a broker or trading platform, typically via an API, and placed on the exchange. Some systems will use smart order routing to get the best price across multiple venues, while others may break up large trades into smaller chunks to minimize market impact. In high-frequency or intraday trading, fractions of a second in execution time can affect returns. 4. Backtesting and Refinement This is your test lab. Before running a strategy with real money, you’ll test it against years of historical data to see how it would’ve performed under various market conditions. As much as we would like to be true, we must never forget that just because a system performed well in the past doesn’t mean it will work in the future. That’s why good backtesting includes out-of-sample testing, stress scenarios (like 2008 or 2020), periods of slow rising and falling markets and fast rising and falling markets, as well as reasonable assumptions about trade slippage and transaction costs. 5. Ongoing Monitoring and Adjustments Algorithmic trading isn’t “set it and forget it.” Even fully automated systems require monitoring. APIs break. Data feeds stall. Market regimes change. The most successful DIY traders treat their systems like living, breathing tools while refining them over time, adjusting for new conditions, and learning from mistakes. Even the best algorithm is only as good as its ability to adapt. You must want to commit the time to not only developing a system but continually commit to the ongoing maintenance. Popular Algorithmic Trading Strategies for DIY Investors While hedge funds may run hyper-optimized black box systems, most DIY investors benefit from keeping it simple. Here are several algorithmic trading strategies that are both approachable and powerful: 1. Momentum Trading This strategy assumes

Key Takeaways: The Papa Bear Portfolio is a momentum-based investment strategy that selects 3 out of 13 diversified ETFs each month based on 6-month performance (136 trading days). It’s more aggressive than the Mama Bear Portfolio (holds 3 ETFs vs. 5), meaning more upside potential but more volatility. It is designed to be systematic and low maintenance, with no forecasting, emotional decision-making, or daily monitoring required. This strategy is good for long-term investors who prefer steady compounding over trying to “beat the market” daily. Uses cold data, not market opinions, to guide decisions Introduction: Why “Papa Bear”? When Brian Livingston unveiled the Papa Bear Portfolio in 2018, his goal was to provide everyday investors a playbook that could allow their accounts to grow in a bull market, yet hunker down like a grizzly when storms roll in. He wasn’t trying to invent another flashy trading system or beat the S&P 500 in every single year. Instead, he set out to help with a more practical problem. How can real people stay invested for the long term without letting volatility hijack their emotions? Porter Investments is passionate about constantly looking for ways that can help the individual investor do that. Livingston saw that most portfolios live at one of two extremes. On one side are pedal-to-the-metal stock allocations that soar in good times but leave investors wide-eyed and sleepless in panics. On the other hand, there are ultra-defensive mixes that preserve capital yet barely outpace inflation. Papa Bear tries to split that difference. By ranking a diverse menu of asset-class ETFs each month and owning only the three with the strongest momentum, the strategy seeks to ride what’s working and sidestep what isn’t. There is no crystal ball, just cold market data and a pre-set rulebook. This guide was written to unpack the “why” as much as the “how.” By reading this you should be able to understand the strategy’s aims, rebuild it for yourself, judge whether it suits your own temperament and tax situation, and perhaps most important, start to see why a little simplicity and regular routine can be the secret ingredient to long-term investing success. What Is the Papa Bear Portfolio? At heart, Papa Bear is a momentum-based investment strategy designed to deliver balanced growth while limiting deep losses. From a menu of 13 broad ETFs, the portfolio owns only the three with the best recent performance. Positions are equal-weighted and checked monthly. The premise of the strategy can be quickly summarized as follows: Follow what’s working. Own assets that are already rising, whether they’re U.S. stocks, gold, or short-term Treasuries. Cut what’s not. If an ETF falls out of the top three momentum slot, sell it and buy the next one up the leaderboard. Stay diversified. The menu spans equities, fixed income, commodities, and REITs so the winners probably would not come from the same category twice in a row. It is important to understand that many momentum strategies do not achieve their longer-term outperformance from the outsize gains during bull markets, but instead, they achieve it from losing less during severe bear markets than a more passive buy and hold approach. Papa Bear adheres to that approach, but its strong point is that it is a systematic, low maintenance investment approach. The Philosophy Behind the Papa Bear Portfolio Most portfolios are built for either offense (maximum growth) or defense (capital preservation). Papa Bear tries to split the difference. The logical argument behind the strategy is this: You only get higher long-term returns if you stay in the game Momentum is the engine. It is an evidence-based, quantitative finance principle showing that winners tend to keep winning for a while. Diversification and cash-like assets are the seat belts. Together, they create a smoother ride that investors are less likely to abandon in panic, reducing the impact of emotional biases like loss aversion or recency error. The Papa Bear Portfolio differs from another strategy we have discussed before: the Mama Bear Portfolio. While both use the same momentum-based selection process from a diversified ETF menu, Papa Bear holds the top three performers each month, whereas Mama Bear holds the top five. This makes Papa Bear more concentrated and potentially higher returning, but also slightly more volatile. Mama Bear is designed for a smoother ride with broader diversification, appealing to more conservative investors. Core Components of the Papa Bear Portfolio Asset Symbol Why it’s included  U.S. Total Stock Market VTI Broad mkt. exposure for uptrends International Stocks VXUS Diversifies for geographic risk Small Cap Stocks  IWM Captures size premium Long Term Treasuries TLT Defensive positioning vs. StocksShort Term Treasuries SHY Cash Proxy IG Corporate Bonds LQD Income plus Relative SafetyGoldGLDInflation hedgeReal Estate VNQSome Income, hard asset alt.CommoditiesDBCHard assets exposureEmerging MarketsVMOInternational diversification/growth In addition, you could include specific, focused ETFs within an asset class such as:  High Yield Bonds  JNK Income with equity behavior Income with equity behavior VEA Established FTSE opportunities Once you have exposure within an asset class, appropriate momentum should be your guide. The abundance of ETF’s provides you with ample opportunities for analysis. How the Papa Bear Portfolio Works Generally, you follow the following steps: Step 1: Gather market data. At the month-end, calculate each ETF’s total return over the past 136 trading days (~6 months). Step 2: Rank them. Sort the 13 returns from highest to lowest. Step 3: Buy the top three. Allocate one-third of your capital to each. Step 4: Repeat next month. If today’s top three differs from last month’s, trade accordingly That’s it. No inflation forecasts, no prediction about where to not invest today, etc. You do what the financial data tells you. Why 136 Days? The original research found that roughly six months balances responsiveness with noise reduction. Too short and you chase whipsaws; too long and you react late to regime shifts. Because the rule is hard-coded, you remove the temptation to fiddle, which is an important edge over most DIY “seat-of-the-pants” investment strategies. Advantages of the Papa

Key Takeaways Backtesting helps evaluate , not predict , an investment strategyIt allows you to “test drive” a strategy using historical data, helping to reveal strengths and weaknesses. But it’s not a crystal ball for future performance. Success depends on using accurate data and full market cycles.Incomplete data, survivorship bias, or cherry-picked time periods can mislead. Effective backtesting requires clean, comprehensive data — and testing strategies across different economic and market cycles. No single metric tells the full storyYou need to analyze multiple performance indicators (CAGR, drawdown, Sharpe Ratio, beta, ulcer index, etc.) to truly understand how a strategy performs — especially under stress. Avoid common pitfalls like curve fittingIt’s easy to over-optimize a strategy to past results, which leads to fragile outcomes in real markets. The goal is resilience, not perfection on paper. Transparency and ethics matter.  Backtest results should be shared honestly — with clear explanations of assumptions and limitations. Results should never be presented as guarantees or overly polished sales pitches. There’s a temptation in investing to believe that if something worked in the past, it will work again. That logic fuels many decisions, good and bad. But the real challenge lies in knowing why something worked, when it worked, and if it could work again. This is where portfolio backtesting steps in. Backtesting is like running your investment strategy through a time machine. You take a strategy using historical data and ask, “If I had done this before, how would it have turned out?” It’s a simulation that attempts to answer one of the most important questions an investor can ask: Does this idea or strategy actually work? I. What Is Portfolio Backtesting? At its core, portfolio backtesting is the process of applying an investment strategy to historical data to estimate how it might have performed in the past. While it doesn’t predict the future, it can help you better understand the strengths and weaknesses of a strategy. Think of it like test driving a new car before negotiating a price to buy it. You’re not trying to predict every traffic light, but you want to get a better idea of how it navigates through traffic.  Done right, backtesting is a tool for insight. Done wrong, it creates wrongly placed confidence and expectations that are disconnected from reality. Why Backtesting Matters Backtesting has become one of the foundational tools in investing. When done correctly, it helps both novice and professional investors build conviction and clarity around their strategies. It can reveal whether your approach works only in certain market conditions or holds up over long-term cycles. Without backtesting, you’re flying blind—making investment decisions based on hunches or intuition rather than evidence. But like any powerful tool, its misuse can be misleading. Too often, backtesting results are treated like sales brochures: polished, selectively edited, and overly optimistic. To benefit from the full value of backtesting, you need to understand both its utility and its limits. Reduces guesswork. Instead of relying on gut feelings, you use data to inform your investment decisions. Reveals weaknesses. Backtesting can show how a strategy behaves in bear markets or periods of volatility. Enhances discipline. If you know how a strategy has reacted over time, you’re more likely to stick with it during the tough periods. II. Key Elements of Portfolio Backtesting Backtesting isn’t just about plugging in numbers and hoping for the best. Each element of the process must be carefully considered, from the data you use to the metrics you track. A good backtest tells a story: how the strategy behaved, when it struggled, and what that might mean going forward. It is the collection of many calculations, when studied critically as a group, that starts to paint a picture of possible investment outcomes.  It starts with data – accurate, comprehensive, and properly adjusted. From there, you analyze many elements of portfolio performance using the right metrics and ensure you’re testing across diverse market conditions. In this section, we break down just a few of the key components that every reliable backtest must include. 1. Historical Data Price history: Past asset prices, adjusted for splits and dividends. Trading volumes: Helps verify liquidity and buyer/seller convictions. Economic indicators: Critical for macro-sensitive strategies. Challenges: Incomplete or incorrect data can distort backtesting results. It is imperative that you have a meaningful sample size, one that is statistically sufficient.  Survivorship bias can sneak in if components of the investment strategy are no longer being traded. 2. Metrics and Performance Indicators Backtesting results are only as useful as the metrics you use to analyze them. Simply seeing that a strategy made money over a certain time period isn’t enough. You need to understand how it made money, how much risk it took on, and whether that risk was justified. This is where performance indicators and metrics come into play. They allow you to compare strategies apples-to-apples, assess volatility, and gauge the potential pain points an investor might face. Whether you’re building a new portfolio or evaluating an existing one, these tools provide a language to describe both success and failure with clarity. At a minimum, some of the metrics and performance indicators you should analyze include: Compound Annual Growth Rate (CAGR): Smooths out yearly returns into a single, comparable figure. Maximum Drawdown (Daily): Tells you how far the portfolio fell from peak to trough. Don’t get lazy and look only at monthly drawdowns. This is what many in the industry use in sales literature, but it hides the amount an investment fell in the past. We have had many snapbacks in prices since 2020 that started during the month, causing a monthly number to understate the actual drop.   Standard Deviation of Monthly returns (Annualized): Provides an indication of historical volatility, but because of its non-directional calculations, tends to be more suited as a longer-term measure.  Rolling returns and tracking to benchmark: Shows continual rolling 12-month look back at returns instead of looking at just annual returns. Periods of extreme volatility and Bear markets don’t always

Introduction: Why Quantitative Investing Matters Imagine trying to make investment decisions in a room full of TVs showing CNBC, CNN, Fox News, and Bloomberg. Everyone has an opinion, emotions run high, and headlines constantly pull your attention. Quantitative investing is an attempt to turn down the volume. It’s an approach rooted in logic, rules, and data rather than gut feeling or hot takes. Quantitative investing (or “quant investing”) uses data analysis, mathematical modeling, and statistical tools to guide investment choices. What started in very secretive firms like Renaissance Technologies in the 1980s and 90s has been sweeping into more mainstream firms and portfolios for many years now. There are many different variations and applications today, from Robo-advisors to ETFs driven by rules-based criteria, as quantitative strategies have gone from niche to necessary. This data-driven framework is appealing for long-term investors who want to overcome emotional biases and stay consistent. However, it also comes with its own risks and learning curve. It’s not just about numbers and formulas—it’s about consistency. In a world where headlines can make markets swing wildly, quant investing is a quiet, deliberate process that aims to stick to the plan regardless of market noise. That can be an enormous advantage for those who want their portfolio to reflect discipline, not drama. And as more financial tools become digitized and accessible, individual investors have more opportunity than ever to apply quant principles in their own decision-making. Key Takeaways Quant investing uses data, not emotion. Instead of reacting to market headlines or gut feelings, quantitative strategies follow rules based on math, logic, and historical data. It’s not just for Wall Street. From robo-advisors to DIY platforms, individual investors now have access to quant tools once reserved for hedge funds. Simplicity often wins. The best models aren’t always the most complex—they’re the ones that are clear, tested, and built to adapt. Risk management is baked in. Good quant strategies include built-in rules for position sizing, stop-losses, and rebalancing to help weather different market conditions. What Are Quantitative Investment Strategies? Quantitative investing strategies rely on financial data, market data, and economic indicators to uncover patterns and make investment decisions. In contrast to discretionary investing, where humans analyze and interpret the market manually, quant strategies depend on algorithms and models to do the heavy lifting. A typical quant strategy might look at things like a stock’s price momentum, earnings reports, or even social media sentiment. By using a blend of data analytics and predefined rules, the strategy decides when to buy or sell. This process removes the guesswork and personal bias that often creeps into traditional investing. This approach works best when it is applied with rigor and consistency. Quant investing starts with a hypothesis about what drives returns, such as undervaluation, earnings surprises, or investor overreactions, and then it tests that theory with large amounts of data. If the data supports the hypothesis, it may become the foundation for a rule-based model. The goal is to make decisions based on what has worked historically, statistically, and with logic, not on a gut feeling or media hype. A few more common inputs for quant strategies include: Stock prices, volume, and volatility Company fundamentals like earnings and debt Economic indicators such as GDP or interest rates Alternative data, like web traffic or satellite imagery How Quantitative Models Are Built Good models start with a simple question: Can a repeatable pattern or anomaly in the market be captured and profited from? That question attempts to be answered with lots of data.  Quantitative models begin with historical market data, which is analyzed to find patterns. These patterns are then converted into mathematical rules. Before any real money is invested, these rules are back-tested on past data to see how they would have performed. But there’s a catch: past performance is not always a predictor of future results. That’s why a great model also undergoes out-of-sample testing and validation, which is tested on data it hasn’t seen before. Common tools include Python, R, MATLAB, and Excel. They are then paired with solid statistical reasoning and strong risk management. Even with rigorous testing, quant strategies must be stress-tested across different market conditions. It’s not enough to succeed during bull markets; a resilient model needs to handle volatility, downturns, and shifting correlations.  Overfitting – which can cause a model to work great on historical data, but fail in real-time, is one of the greatest dangers. Unfortunately, it is also one of the most common occurrences we see. That’s why simplicity, transparency, and ongoing refinement are valued in good models. The goal is never perfection, but robustness. Common Types of Quantitative Investment Strategies Quantitative strategies come in many flavors. Each type looks for different patterns in market behavior and relies on its own set of assumptions. A few of the variations used today include: Factor-Based Investing: This strategy selects stocks based on factors like value, momentum, size, or quality. It looks for common traits linked to outperformance. Statistical Arbitrage: Often called “stat arb,” this method identifies pricing anomalies between similar securities. Think what it would be like to buy Nvidia and short Samsung if their usual price spread diverges. Trend Following: This approach rides market momentum. Generally, its approach is that if prices are rising, buy. If they are falling, sell. The goal is to let winners run and cut losers short. High-Frequency Trading (HFT): Operating at microsecond speeds, HFT strategies capitalize on tiny price differences across exchanges. This requires deep tech infrastructure and high capital requirements. Machine Learning Models: More advanced systems use algorithms that are learned from data. They can uncover complex relationships but often lack interpretability. Each of these strategies has its unique appeal and challenges. Factor investing has grown popular due to its transparency and ease of replication. “Stat arb”, while potentially lucrative, can suffer when correlations break down. Trend following shines in strong market moves but can struggle in choppy or sideways markets. High-frequency trading demands infrastructure and access that’s usually limited to

If you’ve studied price charts looking for clues, you know that markets don’t speak in words – they tend to speak in repetition and patterns. They are driven by Psychology. When the same price support level holds again and again, it may be the market is quietly insisting on something. And when it happens four times? That’s where the quadruple bottom pattern may be taking shape. The quadruple bottom is one of the rarest chart patterns in technical analysis. And its rarity is exactly what makes it worth understanding. Think of it like four failed jailbreaks: the sellers keep pounding on the same support level, but it holds firm. Each bounce builds confidence that maybe, just maybe, this is the floor. That may be a reversal pattern is unfolding. There’s also an emotional advantage in recognizing it. Traders who have been burned by false breakouts in the past may finally regain conviction when they see this pattern unfold consistently. This is not just a technical pattern; it’s a signpost of conviction, uncertainty, and change in behavior by buyers and sellers alike. That conviction doesn’t arise in isolation. It builds over time as the market refuses to break lower. Each touch reinforces a collective belief among participants that a new floor is in place. It becomes a self-fulfilling foundation where enough believers make it real. Why Understanding the Quadruple Bottom Pattern Matters: Recognizing the bottom pattern early can provide a strong risk/reward setup. It builds upon the principles of the double bottom and triple bottom patterns, but with more conviction. It signals a potential change in price action after prolonged consolidation. It helps investors regain confidence in uncertain market conditions. It acts as a visual story of market resilience and price defense. It builds confidence in long-term market support zones. It can signal institutional accumulation at the lows. I. Defining the Quadruple Bottom The quadruple bottom is a technical analysis chart pattern that occurs when a stock or asset tests a specific price support level or area four separate times without falling below it. This creates a flat base with multiple attempts to break that level, followed by a potential upward breakout. Unlike its cousins—the double bottom and triple bottom patterns—this formation suggests even stronger market resilience. The more times a level is tested and holds, the more significant it becomes. Buyers and sellers engage in a quiet tug-of-war, and the support line becomes the psychological battlefield. It’s not always clean. The lows might deviate slightly. Sometimes it looks like a sideways mess. But patterns don’t need perfection to work, they just need persistence. Importantly, the quadruple bottom does not function in a vacuum. It must be considered alongside broader technical and fundamental contexts. Is volume supporting the price floor? Are macroeconomic events influencing behavior? These questions deepen your understanding of the pattern’s potential. Like any chart pattern, confirmation and risk management are important. The more context you gather—volume analysis, trend strength, sentiment shifts- the more clarity you bring to your decision-making process. II. Understanding the Formation Process Most quadruple bottom formations begin after a market has been trending lower or trading sideways. The first touch usually follows a drop. What follows is hesitation. Attempts for a market rally fade. Sellers push down again—but this time, it doesn’t go further. And again. And again. In between these dips, the price rebounds slightly, creating a resistance level above the support zone. This price band or range, with repeated bottoms and muted tops, creates a coiled spring. Fewer sellers step in. More buyers accumulate. Price compresses. Tension builds. The final act? A price break to the upside that confirms the pattern. Each bounce off a support level is more than just a line on the chart. It is a decision by traders to hold firm or add to positions. Over time, these actions reflect a consensus that the price is undervalued. As the fourth touch holds, confidence swells, and sellers lose resolve. It’s this psychological escalation that makes the pattern so potent. The formation’s timing also matters. If it develops over weeks or months, the implications for a breakout can be far more significant. Time compression builds pressure—and with it, the strength of any move that follows. III. The Mentalities That Drive Quadruple Bottoms Price charts are just pictures of people’s decisions. And when you see a quadruple bottom, you’re seeing an indecision shift toward conviction. Each failed attempt to push below support creates cracks in seller confidence. On the other side of the trades, the buyers get braver; they see value. They know that others see value, too. The market begins to rotate from fear to curiosity to optimism. Buyers begin to act more quickly. Sellers get tired. And before long, the buyers and sellers who were locked in a stalemate begin to tip the scale. Market psychology is a key driver here. The longer prices are held at the support level, the more likely new institutional or retail investors begin to view it as a floor. That accumulation stage often becomes the seedbed for explosive price movements once resistance breaks. You aren’t just trading lines or trading levels, you’re trading behavior. This transition from skepticism to belief can be observed in market sentiment, news coverage, and even social media chatter. Once enough participants believe a bottom is forming, their actions drive the pattern to its final phase: the breakout. IV. Confirmation Methods: Volume & Technical Indicators A pattern is just a pattern until something confirms it. That’s where volume and indicators come in. Technical analysis gives us tools to help separate real breakouts from fake ones. Start with volume: if the price breaks the resistance level on a volume spike, it may mean more people are coming on board. At the very least, you may have more conviction with the existing holders. If indicators like RSI or MACD also diverge from price action during the lows, it signals weakening downside momentum. You can add other moving averages or Bollinger Bands

If you could build an investment portfolio designed to weather any storm – economic booms (2021), busts (2008, 2020), inflationary spikes (2022), and deflationary drops (2015), wouldn’t you want to know how it works? That’s the idea behind Ray Dalio’s All-Weather Portfolio. Born out of decades of extensive research and market observation and built on the principles of risk parity and economic cycles, this strategy aims to create a diversified portfolio that performs reliably across the four economic seasons that Dalio identifies: rising growth, falling growth, rising inflation, and falling inflation. It does not try to predict what’s next. Instead, it attempts to prepare for almost anything. I. Why the All-Weather Portfolio Matters Markets aren’t linear. We live through booms and busts, tech bubbles and housing crashes, deflationary recessions, and inflationary shocks. Social media can accelerate our fear and sentiments surrounding these events.  Traditionally balanced portfolios, like the classic 60/40 split between stocks and bonds, worked well at certain times, particularly during the disinflationary periods. But what happens when inflation rises or stays elevated? Or, when growth falters? Or both? This is where Ray Dalio’s approach makes a difference. Instead of basing an approach on historical averages or market forecasts, the All-Weather Portfolio was designed to survive and thrive in any economic environment. It acknowledges something that most investors overlook: the future is uncertain and surprises are inevitable. Major moves in the markets do not come from what people are expecting. They come from the unexpected, those events that were not on anyone’s radar. Economic shifts, policy changes, geopolitical tensions, these are things that can’t be continually forecasted with confidence. The 2025 Tariff tantrum is a great example.  The All-Weather Portfolio isn’t about trying to be right more often. It’s about being prepared even when you’re wrong. In this way, it gives investors a practical tool to reduce emotional decision-making and avoid panic-driven mistakes during a bear market. The strategy also offers peace of mind for those nearing retirement or managing generational wealth, where preservation is as important as growth. In uncertain times, confidence comes from knowing your portfolio isn’t betting on any one outcome.  It’s balanced for all of them. II. The Philosophy Behind the All-Weather Strategy Ray Dalio, founder of the hedge fund Bridgewater Associates, asked a deceptively simple question: What kind of portfolio would perform well across all environments? Rather than trying to outguess the market or the economy, Dalio focused on preparing for the full range of possibilities. His experience taught him that major market moves are often triggered by surprises—events that fall outside of investors’ expectations. These can’t be timed, but they can be prepared for. Dalio’s approach to economic analysis led him to identify the fundamental drivers of asset prices: changes in growth and inflation. By structuring a portfolio that is indifferent to any one economic scenario, investors are no longer beholden to the swings of a single market or asset class. This is a strategy rooted in humility and acknowledging that even the best forecasters are frequently wrong.  Many people may start managing some of their investments with little humility, but reality always finds a way to provide you with more.  This approach helps to make that process less painful. The result is a framework that distributes risk evenly across the different economic seasons, ensuring that no single event can dominate the outcome. This isn’t just about diversification, it is about intelligent, scenario-based diversification. Dalio and his team broke the economy down into four possible “seasons” or economic environments: Rising growth (economic expansion) Falling growth (recession) Rising inflation (1970s-style inflation shocks, mid-2020’s?) Falling inflation (deflationary slowdowns) By spreading investments across assets that do well in each of these, and balancing risks, you create a portfolio built for any weather. III. Understanding Risk Parity Most investors are familiar with the idea of diversifying a portfolio by mixing different asset classes. But diversification by asset type isn’t enough. The All-Weather Portfolio uses a more advanced idea called risk-parity, which focuses not on how much money is invested in each asset, but on how much risk each one contributes to the portfolio. In a traditional 60/40 portfolio, for instance, even though bonds make up 40% of the capital allocation, most of the risk, which can be more than 90%, can come from the 60% invested in stocks. That’s because stocks are significantly more volatile than bonds. This means that the portfolio’s fate still heavily depends on how equities perform. Risk parity aims to equalize the risk contribution of each asset class. That often requires allocating more money to lower-volatility assets like long-term bonds and less to high-volatility ones like equities. When risks are balanced this way, the portfolio becomes more resilient. Instead of riding the highs and lows of a single asset, it reacts more smoothly to different market conditions. This approach also allows for the use of leverage in some cases, particularly with low-risk assets, to help improve returns without increasing volatility beyond acceptable limits. Risk parity doesn’t eliminate risk; it redistributes it in a more intentional and structured way. IV. The Core Components of the All-Weather Portfolio At the heart of the All-Weather Portfolio are five key asset classes, each chosen for its ability to perform well under specific economic conditions. This isn’t just about picking investments that “diversify” on paper. Each component has been deliberately selected to fill a particular role as the economy cycles through its normal phases – some shine when the economy grows, others when it contracts, and others still when inflation unexpectedly spikes. The main benefit of this approach is that it can work without requiring any forecast. We have nothing against forecasters, and we all need to plan. But it can become a problem when we rely on a forecast to make an investment decision. We may desperately want a forecast to turn out true, but at the end of the day, it might not matter. These assets are combined in such a way that no matter

Retirement planning is one of the most important financial decisions you’ll ever make. Many financial plans make assumptions about longevity, but planning for an excessively long life can lead to unnecessary underspending, while underestimating lifespan can result in financial shortfalls. Three important risks center around: Investment Risk – The variability of market returns can impact retirement income. Inflation Risk – The purchasing power of money may decline, and failure to account for inflation properly can lead to financial strain. Longevity and Mortality Risk – The uncertainty of lifespan impacts how retirement assets should be managed.  The important questions focus on longevity risk (outliving resources) and mortality risk (one spouse dying earlier than expected and reducing household income). These two risks create a dilemma in retirement planning. How Long Should I Plan For Retirement? If you underestimate your lifespan, you risk running out of money. If you overestimate, you might live too frugally and miss out on enjoying your wealth. Most financial plans default to assuming a 30-year retirement, with a fixed lifespan to age 90 or 95. However, this one-size-fits-all approach can create financial risks. A smarter strategy considers longevity risk, mortality risk, and retirement income sustainability. In this comprehensive guide, we will go over: How long people are living today (historical trends in life expectancy) The risks of outliving your savings (longevity risk) The financial impact of losing a spouse early (mortality risk) The best strategies for a sustainable retirement income Common retirement planning mistakes to avoid By the end, you’ll be better equipped to plan for a retirement that lasts, without overspending or underspending. How Long Do People Live? Understanding Life Expectancy Trends To plan retirement correctly, you must first understand how long people live today. Life Expectancy Over The Last Century In 1900, the average life expectancy at birth in the U.S. was 47 years. As of 2020, it’s nearly 80 years. Source: CDC, Social Security Administration, mortality.org More importantly, life expectancy increases as you age. Please keep in mind these are averages, but if you’re 65 today, you have a 50% chance of living to 85. A 65-year-old couple has a 50% chance that at least one spouse will live past 90. 25% of 65-year-olds will live to 95 or beyond. To put this in perspective, consider the individual who was 65 in 2020. They were born in 1955. In 1955, their life expectancy was probably a little over 68 years. Now, at age 65, their life expectancy is 85 years, 17 years longer on average. This data proves that planning retirement to 95 is not extreme – it’s realistic for many people. Why Traditional Life Expectancy Assumptions Fail Most retirement plans use a fixed life expectancy, usually age 90 or 95, to determine how long income needs to last. While this seems safe and conservative, it often leads to oversimplification, rigid planning, and missed opportunities. Retirement isn’t a one-time calculation. Life expectancy isn’t a single number. It’s a moving target that changes as you age and as your circumstances evolve. Just as investment plans are regularly reviewed and updated, your retirement timeline should also adjust based on real-life developments: health status, medical advances, family history, and lifestyle changes. For example, if you’re 65 today and healthy, the fact that you’ve already reached 65 improves your odds of reaching 85, 90, or beyond. But most traditional plans never revisit that assumption. They set it and forget it. The result? Retirees either underspend out of fear or overspend by assuming too much certainty. Here’s why fixed life expectancy assumptions fall short: Life expectancy increases with age. If you make it to age 70, your life expectancy is no longer 85; it has increased. Fixed models ignore this progression. Health and lifestyle play a major role. Non-smokers, physically active individuals, and those with healthy diets typically outlive the averages. A 65-year-old in excellent health could easily live 25 to 30 more years. Family history matters. If your parents and grandparents lived into their 90s, your personal odds of longevity are higher than average. This nuance is rarely reflected in traditional plans. Higher income and education correlate with longer life. Studies show that individuals in the top income quintiles live significantly longer than those in lower ones. Yet most life expectancy assumptions are based on general population averages. Static planning ignores medical and technological advancements. Innovations in medicine, diagnostics, and treatments extend lifespans. A fixed plan doesn’t account for progress that may add years to your life. Psychological behavior skews decision-making. When clients see a retirement plan that ends at age 90, they subconsciously think of it as a finish line. That can distort spending behavior by either being too cautious or too reckless. To improve accuracy and confidence, your retirement plan should treat life expectancy as a dynamic probability, not a static endpoint.  The Two Biggest Retirement Risks: Longevity vs. Mortality Longevity Risk: What If I Live Too Long? One of the most overlooked dangers in retirement planning is the longevity risk, which is the risk of living longer than expected and running out of money as a result. While it may seem like a “good problem to have,” it can be financially devastating if not planned for correctly. Many retirees assume they’ll live into their 80s and base their savings and withdrawal strategy accordingly. But the truth is, you could live 10 to 15 years longer than expected, especially with improvements in healthcare and genetics working in your favor. Without a flexible, sustainable income strategy, these extra years can put serious stress on your portfolio. This is, by far, the biggest concern we see with investors nearing retirement.  Example: Jane’s Retirement Plan Jane, 65, retires with $3.5 million in savings. She plans for a 30-year retirement (to age 95). She withdraws $120,000 per year from her IRAs to help cover expenses. If she lives beyond 95, she could run out of money. The problem? Jane doesn’t know if she’ll live to 75 or 105. A 30-year retirement is no longer rare. If your plan only anticipates 20 to

Although investing is often described as a balance between risk and reward, most investors care more about one than the other. When the stock market is soaring, we chase returns. When it crashes, we wish we had been more cautious.  This emotional tug-of-war is why asset allocation is important. It determines how your investments are spread across different asset classes like stocks, bonds, and commodities, ultimately influencing your portfolio’s risk and return. Contrary to what you may hear from investing pundits and prognosticators, markets are unpredictable.  That’s why Defensive Asset Allocation (DAA) can be a useful investment strategy – it is designed to help investors manage risk, protect against downturns, and still participate in market growth. This approach blends momentum investing and risk management to adjust allocations dynamically, aiming for steady long-term gains while avoiding catastrophic losses. DAA differs from traditional asset allocation strategies by being proactive rather than reactive. Many investors follow a fixed allocation strategy, meaning they hold onto their investments regardless of market conditions. DAA, however, continually evaluates market trends and adjusts accordingly. If you define market timing as trying to predict when the markets will rise or fall, then we feel that nobody can consistently time the markets. But appropriately responding to events is something we all can do. DAA doesn’t predict crashes—it responds to them as quickly as possible. Investing is never about avoiding risk entirely—it’s about managing it wisely. A well-structured portfolio should not only capitalize on growth opportunities, but it should also shield against significant losses. The financial landscape is littered with investors who suffered severe setbacks because they failed to adjust to changing conditions. Defensive Asset Allocation provides an alternative, allowing investors to stay engaged with the market while mitigating excessive downside risk. This strategy is particularly valuable during times of economic uncertainty when traditional investment approaches may struggle to adapt quickly enough. By the end of this guide, you’ll understand what Defensive Asset Allocation is, how it works, its pros and cons, and whether it suits your investment goals. What is Defense Asset Allocation? Defensive Asset Allocation (DAA) was developed by Wouter Keller and JW Keuning as an investment strategy that reacts to market trends rather than predicting them. Unlike traditional buy-and-hold methods, DAA actively adjusts a portfolio based on market conditions, focusing on capital preservation and steady returns. Core Principles of DAA Momentum-Based Investing – DAA prioritizes assets with strong recent performance, a principle rooted in behavioral finance: assets that have been rising tend to continue rising, and vice versa. By identifying these trends early, DAA captures upside potential while systematically cutting exposure to declining assets. This ensures that capital is allocated efficiently, reducing the chances of being stuck in prolonged downtrends. Momentum is one of the few verified anomalies in the markets. Breadth Momentum – This concept tracks the overall market’s strength. If only a few assets are performing well while the rest lag, it signals potential trouble ahead. Breadth momentum provides insight into whether a rally is broad-based or driven by a handful of stocks. If market participation weakens, the strategy shifts toward defensive positions, helping investors avoid market corrections before they fully unfold. This principle is important for spotting early warning signs of downturns and preventing significant portfolio losses. Defensive Shifts – When market conditions weaken, DAA reallocates into safer investments like government bonds, cash, or defensive assets to mitigate risk. Unlike traditional strategies that stay fully invested in equities regardless of volatility, DAA proactively moves capital away from riskier positions when warning signals emerge. This ability to switch between risk-on and risk-off modes helps smooth returns and reduces drawdowns so that investors are not caught off guard by sudden market downturns. Adaptive Rebalancing – Unlike traditional rebalancing methods that follow a fixed schedule, DAA employs adaptive rebalancing based on market conditions. This means it adjusts allocations dynamically rather than waiting for a pre-set date. When the market exhibits strength, DAA increases exposure to high-momentum assets. When risk indicators rise, it moves swiftly into defensive positions. This approach provides a continuous, responsive framework that enhances portfolio resilience. Adaptive rebalancing not only maximizes participation in bullish trends but also acts as an insurance mechanism against prolonged downturns, making it a key differentiator of DAA from static asset allocation models. The goal is simple: protect against downturns while maintaining steady growth. Why Traditional Strategies Can Fall Short Most investors are familiar with buy-and-hold or the 60/40 portfolio, where 60% of investments are in equities and 40% in bonds. While these approaches have worked historically, they are not immune to severe drawdowns. In 2008 and 2020, markets crashed rapidly, and many investors saw years of gains wiped out in months. DAA offers an alternative by making tactical asset allocation decisions. If market signals turn negative, the strategy moves towards defensive investments to avoid deep losses. Key Componets of Defense Asset Allocation  1. Asset Allocation Breakdown A typical DAA portfolio consists of: 43% Equities (stocks, ETFs, and exchange-traded funds covering broad markets) 40% Bonds (government and investment-grade bonds) 17% Alternative Assets (real estate investment trusts, gold, commodities) This diversification ensures exposure to growth while maintaining downside protection. A well-balanced portfolio mitigates risk by spreading investments across various asset classes, reducing the impact of volatility in any single market. This allocation is also flexible – adjustments are made based on market conditions to optimize performance. The combination of equities for growth, bonds for stability, and alternative assets for hedging enhances resilience in different economic environments. This diversification ensures exposure to growth while maintaining downside protection. A well-balanced portfolio mitigates risk by spreading investments across various asset classes, reducing the impact of volatility in any single market. This allocation is also flexible – adjustments are made based on market conditions to optimize performance. The combination of equities for growth, bonds for stability, and alternative assets for hedging enhances resilience in different economic environments. 2. Momentum Investing Markets are constantly shifting, and DAA allows your portfolio to remain on the right side of momentum. Instead of blindly holding assets, it allocates more to the