The financial world has never seen an investment type like Dynamic Investments (DIs). They automatically change the ETFs they hold based on a periodic (e.g. quarterly) sampling of market/asset price trends. By holding only ETFs that are trending up in price at time of purchase DIs produce returns that are significantly higher than any virtually any standalone ETF or mutual fund being offered today and with lower risk and no active management required.

In addition to delivering higher performance, DIs enable a host of other benefits, a sampling of which are listed below. These benefits form the foundation for a simpler, safer and more profitable future of investing for both buyers and sellers. Readers of the NAOI Research Report will learn how to take advantage of each of the benefits listed below immediately upon finishing the final Section.

1. DIs Are Easy to Understand

DIs are a simple, transparent and logical investment type. People of all investing experience levels can understand how they work and the benefits they provide without extensive financial education. This is a major selling point as the NAOI knows that individuals are more likely to buy investment products that they understand. Marketing campaigns that highlight how DIs work, the returns they produce and the protection from significant losses they provide will attract far more clients than the glossy sales brochures given to investors today.

2. DIs Are Easy to Create

DIs are created by simply combining existing ETFs in the DI format, bypassing the significant time, cost and effort required to develop new ETFs. NAOI students who have learned about DIs can easily create them on their own if they wish.

3. Higher Returns with Lower Risk

Portfolios created using only Modern Portfolio Theory (MPT) methods hold both winning and losing investments at all times (e.g. both Stocks and Bonds) in order to reduce risk. But this approach also reduces returns. In contrast, DIs hold only ETFs that are trending up at time of purchase and avoid, or quickly sell, ETFs that are trending down. As a result, the Dynamic Investment Theory (DIT) approach reduces risk while also INCREASING returns. This is a major advance in the world of investing.

4. Enabling the Inclusion of High-Return Investments in Portfolios without High-Risk

In all market conditions there exist ETFs that track market segments having the potential to soar - for example Internet Stocks or Gold. And there are multiple ETFs that track each of these segments. But these ETFs are too risky to place in a traditional buy-and-hold, MPT-based portfolio as they are extremely volatile. DIs solve this problem by simply including these risky ETFs in a DI’s Dynamic ETF Pool.

Thus, if an advisor believes that Gold is about to soar, they can simply create a DI that holds as purchase candidates ETFs for Stocks, Bonds and Gold (e.g. GLD). GLD will only be purchased ONLY if it is trending up in price more strongly than either Stocks or Bonds at a periodic review. And GLD will be sold quickly if it begins to drop significantly in price via a Trailing Stop Loss order. At the next periodic review the DI will then reenter the market owning either Stocks, Bonds or GLD based on the price trends of each. In this manner investors can take advantage of the gains of GLD without the risk of significant losses should this asset begin to lose value.

5. Stronger Protection from Significant Portfolio Losses

By purchasing only ETFs that are trending up in price and quickly selling them via a Trailing Stop Loss order if they begin trending down, the DIT approach gives users far stronger protection from significant losses than today’s industry-standard, buy-and-hold MPT portfolios. This loss protection benefit will be the centerpiece of a successful marketing campaign that will enable any organization that offers DIs and DPorts to attract far more clients than they do today.

6. Reducing the Human-Risk Element

DIs automatically buy and sell ETFs based on objective observations of asset/market price trends. By doing so they eliminate the significant risks related to subjective human judgments being used to make trades in MPT-based portfolios today.

7. Constant Monitoring of the Market Lowers Investor Stress Levels

Investors holding today’s static MPT portfolios experience extreme stress when markets crash or correct. DIs reduce this stress by having a built-in trading system that constantly monitors market price trends and automatically sells the ETF held to stop significant losses. The DIs then reenters the market at the next Review Event by purchasing an ETF that is trending up. No active management is required. As a result, investors can simply buy and hold DIs and rest easy by knowing that their portfolio is constantly monitoring market price trends and making the trades needed to both capture gains and avoid losses. Because of this unique feature, DIs can be bought and held for the long-term while the ETF held is changes as necessary.

8. MPT Portfolio Enhancement

While a single DI can be used as a complete portfolio, the NAOI is NOT recommending that MPT portfolios go away. DIT and MPT methods work quite well together. By simply inserting one or more DIs in an MPT portfolio, its returns increase while its risk decreases. In this manner advisors can immediately begin taking advantage of DI benefits without significant disruption to current activities.

9. Enabling Additional Diversification Elements

MPT portfolios use only two diversification elements - Company and Asset Class. In contrast, MPT portfolios that include DI building blocks take advantage of FIVE diversification element. They are:

  • Company Diversification (by working with ETFs)

  • Asset Class Diversification (by working with ETFs that track multiple asset classes)

  • Time (by periodically and automatically changing the ETF held by the DI)

  • Management Strategy (by using both MPT buy-and-hold and DIT buy-and-sell management methods)

  • Trade Catalysts (using both subjective judgments and objective observations to trigger trades)

And while MPT diversification elements both lower risk and lower returns, DIT diversification elements both lower risk and INCREASE returns.

10. Uncovering Massive Value in Existing ETF Product Lines

By productizing - and thus monetizing - combinations of existing ETFs, DIs significantly increase the size and value of existing ETF product lines without the need to create a single new ETF. This is value that is now lying dormant in current ETF product lines..

11. Enabling the Creation of a Universal Portfolio

DIs enable the creation of a simple but powerful “Universal Portfolio” that has the goal of maximizing returns while minimizing risk in all economic conditions. This is a goal that works for all investors regardless of their risk tolerance. As a result, no customization for each investor in needed. NAOI testing of the Universal Portfolio shows that it outperforms virtually any MPT-based portfolio being offered today.

12. The Perfect “Default Investment” for Retirement Accounts

The NAOI Universal Portfolio is the perfect default investment for 401k and other retirement plans as it produces significantly higher returns with lower risk than the increasingly outdated Target Date Funds used for this purpose today. If marketed correctly (the NAOI can help) advisors that offer the Universal Portfolio can dominate the multi-billion dollar market retirement market.

13. Meeting the Needs of the Huge, Under-Served Market of Less-Affluent Investors

The Universal Portfolio can also be profitably offered by advisors to less affluent investors without the time, effort and expense required to design a customized portfolio for each. And this portfolio will outperform virtually any customized MPT-based portfolio in use today - giving thousands of individuals the returns they want with the protection from loss that they need. By meeting the needs of this huge, under-served market, investment advisors that offer the Universal Portfolio can open a massive new revenue stream that is being mostly ignored today.

14. Enabling the “Productization of Investing”

DIs can be viewed and treated as the market’s first investing “consumer product” for several reasons. They have a universal goal of maximizing returns while minimizing risk in all economic conditions. Thus, no customization for each investor is needed. They also have a built-in trading system that signals trades based on a periodic sampling of market trends - so no active management is required. As a result DIs for a full range of investing goals can be bought “off-the-shelf” from a variety of vendors.

The “Productization of Investing” is the Holy Grail of the investing world that experts have been seeking for decades. They haven’t found it. The NAOI Research Report shows that the NAOI has. This development will change how investing works at a fundamental level. And those that learn about it first will benefit the most.

15. Opening a Vast and Virgin World of Investing Education and Research

By finally stepping outside of the “MPT box” and thinking differently about how portfolios can and should be designed and managed, DIs open the door to a vast and virgin world of new investment research. The NAOI calls this exciting new field of study “Portfolio Design Science”. that makes possible high performance portfolios, investing strategies and investor solutions that are simply not possible today.

The NAOI has developed a study curriculum for Portfolio Design Science that we make available to academic institutions who want to finally offer a portfolio design course that is based on scientific principles and objective observations - not on subjective human ‘guesses” that are at the core of how portfolios are designed today.

Gaining Competitive Advantage In Today’s Markets

The above partial list of Dynamic Investment benefits, and others discussed in the NAOI Research Report, give portfolio designers, investment advisors and financial organizations that offer them a significant advantage over competitors that remain stuck in the “MPT box”.