About Vine Investing
Traditional investment thinking is to diversify into different assets and sectors to ensure that an individual is not over exposed to the risks of one certain type of stock or asset. This strategy is effective and the majority of an individual’s assets are held in this type of investment fashion, through IRAs, 401ks, pensions, and other venues. Without getting into too much details of portfolio theory and risk management, I will attempt to show investors with this website that a strategy, different from the ones most individuals' assets are held in now, can benefit your total portfolio as well as help hedge your overall risk.
With an actively managed account investors are probably trying to outperform the market by pinpointing opportunities that will provide a better return than the managers of the mutual funds and pension funds that your are invested into already through retirement plans. To this end the investor would not want to be diversified in the same way as these funds or impose limits on what he or she can purchase within their active accounts. This freedom provides true diversification because the investor now has the ability to set up the active portion of their portfolios to follow, or even move opposite their professionally managed portions.
The vine investing strategy is designed to help a self directed investor create a plan to ensure that his or her active portfolio is going in the correct direction. The Vine is broken up into segments, these segments are representing a specific position or paradigms that the investor feels markets are reacting to. During the strategy there are usually two segments that the investor is invested in at one time, usually providing some hedging or little correlation to each other. When the first segment has reached its peak and the second segment is starting to become profitable, the money in the first segment is transferred into the third segment, which should have no correlation or even a negative correlation to the first segment (negative correlation means the two segments would move opposite each other). Since the portfolio is based on progression, the two segments prior to the third one must come true in order for the third to be invested in. This helps to ensure that the correct factors are in place to give the third position (and fourth and so on) the right environment to thrive.
With an actively managed account investors are probably trying to outperform the market by pinpointing opportunities that will provide a better return than the managers of the mutual funds and pension funds that your are invested into already through retirement plans. To this end the investor would not want to be diversified in the same way as these funds or impose limits on what he or she can purchase within their active accounts. This freedom provides true diversification because the investor now has the ability to set up the active portion of their portfolios to follow, or even move opposite their professionally managed portions.
The vine investing strategy is designed to help a self directed investor create a plan to ensure that his or her active portfolio is going in the correct direction. The Vine is broken up into segments, these segments are representing a specific position or paradigms that the investor feels markets are reacting to. During the strategy there are usually two segments that the investor is invested in at one time, usually providing some hedging or little correlation to each other. When the first segment has reached its peak and the second segment is starting to become profitable, the money in the first segment is transferred into the third segment, which should have no correlation or even a negative correlation to the first segment (negative correlation means the two segments would move opposite each other). Since the portfolio is based on progression, the two segments prior to the third one must come true in order for the third to be invested in. This helps to ensure that the correct factors are in place to give the third position (and fourth and so on) the right environment to thrive.
|
Segment 1
· Catalyst o Increasing goods demand · Investment o Trucking company |
|
This is a simple example, but the theory is present. The underlying catalysts show a progression where without the prior catalyst occurring, the current catalyst is less likely to occur. This provides investors with the blueprint for their investment strategy and helps them in focusing on where there research time should be emphasized. For example, in the above situation the investor shuld not put money into segment 3 until segment 2 has started to produce substantial gains to ensure that it is a long term shift.
