Investing Is About to Change
at a Fundamental Level
Welcome to the site of the National Association of Online Investors (NAOI), a leading investor education, investment research and financial consulting organization. On this site you will learn about the unique offerings of the NAOI that empower individuals to invest with confidence and success. And you will learn how the NAOI is changing the way investing works to meet the challenges of 21st century markets.
Allow me to introduce myself as Leland Hevner, President of the NAOI, an organization that I founded in 1997 with the mission of empowering individuals to become confident and successful investors via education, innovation and the use of online resources. Thousands of individuals have taken our online courses, read our published books and/or attended our college classes. Our education offerings can be viewed at this link.
From 1997 to 2008 we taught industry standard portfolio design methods based on Modern Portfolio Theory (MPT), an approach to portfolio design that was introduced to the market over six decades ago, in 1952. Markets have changed significantly since then while MPT has barely changed at all and it simply can’t cope with modern market volatility. We saw this very clearly in 2008-2009 when the stock market crashed and MPT portfolios crashed with it.
The Problem with Investing Today
The problem with MPT methods is that they produce portfolios designed to match the risk profile of each investor and then they are meant to be bought and held for the long-term. As a result, the value of these portfolios drifts up and down with the tides of the market with no tools to either take take profits or to avoid significant losses. These are “static” portfolios trying to cope with “dynamic” markets and they simply are not up to the task.
NAOI experience in working with the investing public for over two decades tells us that until this approach to investing changes, individuals will continue be reluctant to expose their savings to the risk of the market. And those that are participating in the market will continue to invest far too conservatively - not coming close to realizing the full wealth generation potential of equity markets. To enable investors to enter the market with confidence and without fear, fundamental change to how investing works today is needed.
NAOI Dynamic Investments - The Change Needed
In 2009 when the stock market crashed and the MPT portfolios that the NAOI was teaching students to create crashed with it, we paused all education activities until we could find a better approach to portfolio design and investing in general. We clearly saw that more than education was needed to enable individuals to enter the market with confidence; also needed was innovation.
At that point we refocused NAOI resources from Education to Research and Development in order to find and develop a viable alternative to Modern Portfolio Theory; one designed specifically to work in 21st century markets.
Following a multi-year research effort we met this goal with the discovery and development of a new investing approach called Dynamic Investing Theory (DIT) and a revolutionary investment type that DIT creates called Dynamic Investments (DIs).
As you will learn at this link, DIs are capable of automatically changing the equities they hold based on a periodic sampling of asset class and market price trends. By doing so, they are capable of producing returns that consistently and significantly exceed those of MPT portfolios with less risk and lower expenses. Plus, DIs are incredibly simple to understand, design, implement and manage - the entire process can be automated.
NAOI Dynamic Investment Performance Example
The Table below shows a comparison of the performance of an MPT portfolio and a Dynamic Investment, both holding only Stock and Bond Exchange Traded Funds (ETFs). The test period is from the start of 2003 to the end of 2018 – a period that included both stock market crashes and unprecedented stock gains.
The MPT portfolio in this example held both Stocks and Bonds at all times with the allocations shown. The DI held only one ETF at a time; the one trending up in price most strongly at quarterly reviews. Note that the Sharpe Ratio shows how much return is achieved for each unit of risk taken and the higher the better.
MPT Portfolio - Dynamic Investment Performance Comparison: 2003-2018
You can see that the returns of the DI were significantly higher than the MPT portfolio holding the same asset types. And the DI’s higher return did NOT come with higher risk as the Sharpe Ratio increased with the returns. Financial experts will say that the performance of the DI shown above is impossible; and it is impossible using only MPT methods. But DIT is an entirely different approach to investing. When we “think differently” all manner of positive outcomes that are seen today as impossible suddenly become real.
This Change Cannot Be Ignored
Dynamic Investing is a change to the world of investing that will happen. The NAOI is uniquely structured to make sure that it does as you will learn at this link. As the NAOI’s Education Division teaches the public about Dynamic Investments they will demand them from financial advisors. Those organizations that offer Dynamic Investments will own a massive competitive advantage over those that don’t.
The Next Step in the Evolution of Investing
The NAOI sees Dynamic Investments as the catalyst needed to get the world of investing "unstuck” from 1950’s MPT-based methods and evolving to meet the demands of 21st century markets and 21st century investors. They will take their place the following list of investment types that ushered in new, and better, eras of investing.
Mutual Funds - 1929
Exchange Traded Funds - 1993
Dynamic Investments - 2018
The world of investing is about to change and those who recognize the power of Dynamic Investments first will benefit the most. Taking the time to read the information on this site can be the best investment you will ever make.
Start your journey into “the future of investing” at this link.