Investment Strategy & Ongoing Management
You Need a Team That Understands How to Invest in Uncertain Times
At Valley Peak Financial, our approach to investment is tailored to navigate the complexities of the modern financial landscape with precision and foresight. Partnering with Aptus Capital Advisors, we bring you strategies grounded in a deep understanding of market dynamics and the pivotal role of risk management.
-
• Owned and operated by Carter Ellis, with support provided by Guardian Wealth Advisors, LLC
• Three-person team dedicated to VPF clients
• Independent fiduciary advisor
• Custodian of client assets is Charles Schwab & Co., Inc. & College America VA 529
• Provide investment management and comprehensive financial planning
• Quarterly reporting of performance
• Transparent fee structure
-
• Raleigh-based Registered Investment Advisor
• Extensive suite of technology tools
• Back-office billing support
• Securities & Exchange Commission (SEC) compliance resource
-
• Institutional money manager
• Manages over $5 billion in assets
• 12 Chartered Financial Analysts (CFAs) on staff
• Growing team of investment professionals to support our clients
The Problem
Bonds May No Longer Effectively Hedge Stock Exposure
There was a time that bonds offered income and protection from drawdowns. Can we still say that, given inflation and volatility?
The Solution
Risk-Management Across Your Portfolio
Risk management starts with understanding you, and what type of risk you need and want to embrace.
We build a foundation on:
• Low-cost access to the primary asset classes of stocks and bonds
• Downside protection through actively- & passively-managed hedged stock market exposure
• Qualitative & quantitative assessment of your risk capacity and tolerance
Why Manage Risk?
Reduced Downside Can Actually Boost Compounded Returns
In sports, they say the best offense is a good defense and the same can be said for investing in volatile markets. The graph below shows that a mitigated approach is more profitable in the long run when compared against the S&P 500 over the same timeframe.
01/01/2000 - 06/30/2023
Source: Bloomberg, Aptus Research data as of 12/31/2023
This graph assumes an initial investment of $100,000 on 1/1/2000. All dividends and distributions are reinvested. Performance shown does not reflect investor-specific activities, such as contributions, withdrawals, or restrictions. In addition, such results may not reflect the impact that material, economic and market factors may have had during the entire period portrayed. Actual returns experienced by investors will differ from model results.
This is not a recommendation to buy or sell any of the securities mentioned herein. The holdings identified above do not represent all of the securities purchased, sold, or recommended for the adviser's clients. Holdings are subject to change without notice. A complete list of holdings is available upon request.
Minimizing drawdown risk can shorten the recovery time.
| Drawdown | % To Recover | Years to Recover* |
|---|---|---|
| 5% |
5.3% |
0.7 |
| 10% |
11.1% |
1.4 |
| 20% |
25.0% |
2.9 |
| 30% |
42.9% |
4.6 |
| 40% |
66.7% |
6.6 |
| 50% |
100.0% |
9.0 |
Upside Capture Through Downside Protection
We believe the optimal portfolio is one an investor can stick with, a fragile package in our hands to be taken from point A to point B. The integrated allocations are designed to produce what every investor wants: potential for growth & income with defenses against their most feared risks.
We start with low cost and high-quality exposure to primary asset classes & build in alternative return opportunities. We manage risk through diversification, active management, and through actively-hedged strategies.
What are Hedged Equities?
Traditional diversification is the mix of stocks and bonds. Stocks have more growth potential, with more volatility, so the bonds serve as a portfolio stabilizer.
Instead of allocating the typical portion of your portfolio to low-yielding bonds, we can use some of that money to add high-quality stocks and hedging.
Hedging involves using options strategies to protect against downside risk. If done professionally, it can yield favorable results in the event of downturn and provide opportunities to reinvest at favorable levels.
The Bucket Approach Framework
The Bucket Approach assures that clients can stick to their long-term plan. By allocating sufficient assets to Buckets 1 & 2, clients can cover living expenses without exposure to significant market volatility (i.e., the risk of losing value when you need it).
Bucket 3 focuses on long term compounding and earning sufficient return (i.e., avoiding the risk of running out of money). Balancing a mix of long-term return drivers and short-term risk-mitigators, clients can be in a position to pursue better outcomes.
1
Near Term
1-2 Years
Less risk & more stability
2
Mid Term
2-7 Years
More yield & more risk
3
Later Term
7+ Years
More risk &
more growth potential
Managing Risk…
We lean on diversification, like any portfolio manager. But correlations can converge in a downturn, and bonds may not have quite the protection they had when rates were higher.
We manage risk for two primary reasons:
To Reduce Drawdown And The Emotions That Go With It
To Turn Market Drawdowns Into Opportunity
…While Seeking Growth
Managing downside exposure is a smart move, but it’s not a monolithic strategy and we are always adapting to increase potential gains. With proper attention and guidance, stock market returns can come from:
Yield: Dividends + Interest
Growth: Annualized Improvement
Valuation: Changing Investor Appetite
Exposure Highlights
Objectively benchmarked against BlackRock Allocation ETFs (gold standard)
US-Focused: under-weight relative to benchmarks as we continue to see stronger fundamentals in domestic equities. Slowing global growth will continue to challenge international equities.
Smaller Cap: small companies are the only asset class to outperform inflation in every decade since the 1930s.
