By Invitation Only

The world of investing is about to change at a fundamental level. Welcome to a Web Page that describes why this change is needed and what it looks like. For far too long we have been investing using methods created in 1952 when Modern Portfolio Theory (MPT) was introduced. While equity markets have evolved significantly since then, MPT methods have barely changed at all and they can't cope with modern markets.

It is time to bring the world of investing into the 21st century and release the amazing profit potential that today's equity markets offer. Dynamic Investments, created based on a 5+ year R&D effort by the NAOI, do just that. You will learn how on this page.

It takes just a few minutes to read the information presented here, but it will be time well spent. You are one of a very few individuals being offered a first look at the future of investing and to be given the opportunity to take advantage of it now.

Leland Hevner, President
National Association of Online Investors (NAOI)
April, 2018

The NAOI Study that Changes Everything

The National Association of Online Investors (NAOI) has recently completed a multi-year study to find an updated approach to investing that is capable of taking full advantage 21st Century equity markets. Following a multi-years research effort we found it with the development of Dynamic Investment Theory (DIT). DIT creates a revolutionary investment type called Dynamic Investments (DIs) that will fundamentally change the wold of investing for both individual investors and the financial services industry. You will learn how on this Web page that is being made available only to those who I, Leland Hevner, President of the NAOI, have invited via a personal message.

The Study Findings Release - and a Valuable Opportunity

Soon the NAOI will be releasing this revolutionary investing approach to the public and the financial services industry via a nationwide Press Release along with the publication of The Amazing Future of Investing book that describes the DIT approach in detail (see book information below on this page). 

The purpose of this page is to provide a pre-release summary of the new approach to a select group of LinkedIn contacts who I believe are well positioned to take maximum advantage of it now. The NAOI is prepared to offer cooperative arrangements to financial professionals and organizations that will enable them to gain a massive competitive advantage by being among the first to learn about and offer Dynamic Investments to the market. An opportunity like this is rare.

The Need for Change 

For the first ten years of the NAOI's existence, we taught traditional investing and portfolio design methods based on Modern Portfolio Theory (MPT) - the financial industry's "settled science" approach to portfolio design and investing in general.

However, when the stock market crashed in 2008 and MPT-based portfolios crashed along with it, I stopped all future NAOI investor education classes. I realized that we were teaching portfolio design methods introduced to the market in the early 1950's!  While markets had changed significantly since then, MPT methods had barely changed at all and they simply could not cope with modern markets.

At that point I refocused NAOI resources from education to research and initiated a study to find a new and better approach to investing; one designed to thrive in 21st century markets. The chart, at right, illustrates the problem with MPT and shows the promise of an updated approach called DIT that was introduced in 2016. You will learn about DIT and the Dynamic Investments it produces on this page.

What Do We Know About Market Price Behavior?

To develop a new, scientifically-based theory of investing we first needed to identifying the only things we know about market price movements with a high degree of certainty. One would think we know a lot. We don't. Following is the complete list:

• Market prices are cyclical - they move up and down on a periodic basis
   
• Different assets, markets and market segments move up and down at different times - e.g. when stocks move down, bonds tend to move up and vice versa

That's it. But it was enough to enable us to formulate and develop the new, comprehensive investment theory that we needed to fulfill our mission.

The Problem with MPT Theory

Modern Portfolio Theory recognizes the cyclical nature of asset and market prices. But it uses this information in a non-optimal manner. MPT portfolios are designed to reduce risk by owning non-correlated assets such that at all times they hold BOTH winning and losing investments. This reduces risk, certainly, but it also reduces returns. In addition MPT portfolios are meant to be bought and held for the long term, making them "static" investments trying to cope with "dynamic" markets. As a result MPT portfolios are neither able to take maximum advantage of market uptrends nor to provide adequate protection from market downtrends.

For example, the table below shows the average annual returns for the decade from 2008 to 2017 of a typical MPT portfolio with a 50% allocation to a Total Stock ETF (symbol SPY) and a 50% allocation to a Government Bond ETF (symbol EDV). This portfolio simply bought and held both ETFs for the entire test period.  The Sharpe Ratio is a measure of how much return is produced for each unit of risk taken and the higher the better.

During this period both stocks and bonds offered significant gains, at different times, that MPT methods were not able to capture. Dynamic Investments can and did capture them as illustrated next.

Introducing Dynamic Investment Theory

From the observation that equities prices are cyclical and that different asset classes and markets move up and down at different times, the NAOI created the premise that at all times and in all economic conditions there exist positive returns potential somewhere in the market. 

With a premise in place, our next step was to create a theory that would provide a rule-set for creating a new investment type capable of taking full advantage of cyclical markets. We did so and called it Dynamic Investment Theory (DIT). DIT establishes the logic and rule-set for the creation of a powerful new investment type called Dynamic Investments as explained next.

Introducing Dynamic Investments 

Dynamic Investments (DIs) automatically change the Exchange Traded Fund (ETF) they hold based on a periodic sampling of market trends. Whereas MPT-based, asset-allocation, portfolios must, at all times, hold both winning and losing investments to reduce risk, DIs strive to hold ONLY winning investments. By doing so, DIs are able to produce returns that today's "experts" will say are impossible. And this superior performance comes without excessive risk and no active management required. This investment type is a huge leap forward in the evolution of investing!

The components of all DIs are shown in the diagram at right and defined below:

• A Goal - There are an unlimited number of DIs that can be created for a wide range of investing goals. But regardless of the goal, all DIs will have the same components as shown in the diagram at right. The goal of the DI determines which ETFs a designer places in the Dynamic ETF Pool as explained next.
   
• Dynamic ETF Pool (DEP) - Dynamic Investments work with groups of Exchange Traded Funds (ETFs) in a DEP. Chosen by a DI Designer, the ETFs in the DEP specify the areas of the market where the DI will search for positive returns. These ETFs are simply "candidates" for purchase. Only the one trending up in price most strongly at the time of a Review is bought and held until the next Review as described next.
   
• Review Period - The ETFs in the DEP are periodically ranked at set time intervals, called a Review Period, to determine which is trending up most strongly. The "winner" is the one that is bought and held until the next Review. The Review Period is a variable that is defined by the DI Designer. An example would be "quarterly."
   
• Trend Indicator - This is a price chart indicator that is used to rank the ETFs in the DEP at Review event. Only the ETF with the strongest positive price trend is selected for purchase and held until the next Review. The Trend Indicator is  a variable that is defined by the DI Designer.
   
• Another Risk Reducer - The DI design includes another important risk reduction element that is explained in detail in The Amazing Future of Investing book.

In the NAOI book entitled The Amazing Future of Investing, described below on this page, we suggest a Review Period and a Trend Indicator that extensive testing shows to work exceptionally well in any economic condition. By holding these two variables as constants, DI Designers are able to focus on finding an optimal mix of ETFs to place in the DEP. In the book we show the design of several well tested, high performance, Dynamic Investments and their DEPs. These are DIs that readers can begin using immediately to obtain the performance discussed next.

Dynamic Investment Performance 

The following table shows the returns and Sharpe Ratio for a simple DI that holds in its DEP only SPY and EDV, the same ETFs used in the MPT returns table presented above on this page.

You can see that the performance is remarkable superior to that of the MPT portfolio.

How is this possible? There are multiple reasons, but chief among them is that the DI is "market-sensitive"; able to automatically and rapidly change its ETF holding to take advantage of current market trends. The "static" MPT portfolio simply held both asset types (Stocks and Bonds) throughout the period, ensuring that the portfolio held both winning AND losing investments at all times to reduce risk but also reducing returns. In other words, MPT portfolios are "static" while DIs are "dynamic", striving to hold ONLY winning investments. This is why DIs are capable of producing returns that are not possible using MPT portfolios. This is how portfolios of the future will work.

The NAOI Core DI

The DI performance shown just above is amazing. But the DI used was not "optimized". I simply picked two of the most popular Stock and Bond ETFs in the market today. What if we spent some time optimizing it by testing different ETFs for each asset class? We did just that and arrived a the following ETFs as being a better combination:

• EDV - Long-Term Government Bonds - We didn't change this one
• RZG - Small Cap Growth stocks - Replaces SPY

We call this the NAOI Core DI. It produced the returns shown below for the same period as used above for a generic DI.

You can see the effects of changing the Stock ETF used. Significant value-added can be provided by a designer who is trained in the art and science of Dynamic Investment design. Here is an area of research and development that has tremendous revenue generation potential.

The NAOI Core DI is just one of an unlimited number of DIs that can be created. In The Amazing Future of Investing book, discussed below, we show the design of several more DIs that produce returns even higher than the Core. And we show potential developers how to create a product line of DIs for a full range of investing goals.

The Productization of Investing

With the development and introduction of Dynamic Investments, the NAOI has found the "Holy Grail" of the financial industry; namely the Productization of Investing. DIs are investing "products" for these reasons among others:

1. DIs are comprehensive products. They not only define the ETFs to work with but also how they will be automatically managed on an ongoing basis using objective market signals, not on subjective human judgments.

2. DIs have the universal goal of identifying market uptrends and capturing the positive gains potential they offer while avoiding downtrends. They are not customized to meet the risk tolerance of of each individual investor.

3. DIs can be seen as a "portfolio in a box". It is fully company and asset diversified. Plus it is also "time-diversified", capable of automatically changing the ETF it holds to take advantage of current market trends. Just look at the performance of the Core DI shown above. What MPT portfolio produced this level of returns during the same period? Answer: none!

4. Customization of a portfolio is accomplished by using DIs as portfolio building blocks and combining them in ways that meet a full spectrum of goals. A Dynamic Portfolio constructed in such a manner is essentially a portfolio of portfolios - a stunning development in the world of investing and explained completely in Chapter 8 of The Amazing Future of Investing book.

When investing portfolios become "products" they can be mass produced and sold via catalogs from a variety of vendors.This opens the doors to the cleansing effects of competition - an effect sorely missing in today's world of customized MPT portfolios. The Productization of Investing changes to world of investing at a fundamental level.

The Emergence of MPT / DIT Hybrid Portfolios

The NAOI knows that changes of the magnitude described here do not come fast or easy to the world of investing. Too many corporate business models are dependent on the use of MPT portfolio design and all of the related tools and services required to customize and build them. The NAOI realizes this and has a transition solution that we call MPT / DIT Hybrid Portfolios.

In Hybrid portfolios Dynamic Investments can be seen as simply another "asset-class" in a traditional MPT asset-allocation portfolio. For example, a portfolio can be constructed with an 80% allocation to an advisor-created MPT portfolio and a 20% allocation to a DI. Here we have added another degree of diversification - namely methodology diversification. The table below shows the performance of just such a portfolio in which the MPT portfolio holds 50% Stocks and 50% Bonds, while the DIT component is the Core DI discussed above that holds either a Stock or Bond ETF at any one time.

You can see that the performance of this Hybrid Portfolio is significantly higher that a standalone MPT portfolio and with lower risk. The greater the allocation to the DI component, the better the performance. Thus, the Hybrid Portfolio construct can be used as the perfect "transition" vehicle from today's MPT-based investing world to the DIT-based investing world of the future - allowing an individual or an advisor to control the rate of transition by changing the allocations to the MPT and DIT components. 

The Book: "The Amazing Future of Investing"

The full story of how DIT and DIs were developed, along with how they can be used is presented in The Amazing Future of Investing book as described below.

Book Details:

Format: 8.5" x 11.0", comb-bound for easy "lay-flat" study
Pages: 224
Publish Date: April, 2018
Publisher: National Association of Online Investors, Tampa, FL
Price: $499 (See the NAOI Store for Sale Price)
To Purchase: Go to the NAOI Store to purchase. 

Overview

The multi-year NAOI search for a better approach to investing and the methods used to find it are completely documented in our new book entitled The Amazing Future of Investing. Here you will also find a comprehensive description of Dynamic Investment Theory and  the Dynamic Investments that DIT creates along with how how DIs can be used to improve virtually every area of the investing world. The book Cover and Table of Contents are shown at right.

More than a "Book"

This is more than a "book". It is better described as a portal into a better, more profitable future of investing and a detailed roadmap for successfully navigating and taking full advantage of it.

Don't make the mistake of comparing this publication to $19.95 investing "how-to" books that can be found by the dozens on Amazon. It is more akin to a report resulting from a multi-thousand dollar study commissioned by a financial organization to dramatically increase the quality and revenue generation power of its product offerings. Seen in this context, the price of this book is insignificant. And the ROI of purchasing, reading and acting on the information it contains is off the charts.

The book is also essential reading for individual investors who want higher returns from their portfolios with lower risk and less dependence on financial advisors. DIT is so incredibly simple that investors of all experience levels will be able to easily implement and manage the DIs that are described in the book immediately upon completion of the final chapter. DIT and DIs meet every goal set for us by the public when we began our search for a new approach to investing. 

DIT Application White Papers

To supplement the information provided in The Amazing Future of Investing book, the NAOI offers a series of focused White Papers that show the benefits of, and the business case for, the use of Dynamic Investments in specific areas of the financial industry as listed below.  White Papers are free of charge qualified requestors.

DI Application White Papers:

• Dynamic Investment Designers (a new organization type)
• ETF Developers and Vendors 
• ETF Product Researchers
• Portfolio Strategists, Designers and Managers
• Financial Advisors
• Index Creators
• 401k Plan Users and 401k Plan Providers
• Discount Brokers
• Academia

To request a White Paper please contact me directly via email at LHevner@naoi.org. Send to me your name, position, company and area of interest as listed above along with a link to your Web site if applicable. If your area is not in this list, contact me to discuss your unique application.

Why Change Is Inevitable

Change is never easy. It takes us out of our comfort zone. But change is necessary for progress to occur and evolution to take its natural course. Change from static investing methods to dynamic investing methods is not optional for these reasons among others:

1. Demand. The NAOI is teaching Dynamic Investment Theory to the public via the above described book, extensive market efforts and our investor education courses. When the public learns about the simplicity, high performance and low risk of Dynamic Investments, they will demand them. Financial organizations that offer DIs will meet this demand and thrive. Those that don't will find themselves at a tremendous competitive disadvantage. 
    
2. Competition. When even one major financial organization begins offering DIs, all others will be forced to follow in order to compete.
    
3. Do It Yourself Investors. Dynamic Investments are so easy to understand, implement and manage that individual investors will be able to do so on their own using an online broker as described in Appendix C of The Amazing Future of Investing book, bypassing financial advisors completely. Thus, if people can't find an organization that offers DIs they have the DIY option.

Many in the financial industry are happy with the way investing works today. After all, the status quo is making them rich. But the investing public will have the final say in this matter. And their message will be "offer Dynamic Investments or we will either find an organization that does or invest on our own using an online broker if we must." When the market becomes aware of DIs, change in the financial services industry will no longer be optional for organizations that want to survive.

DIT Support Resources

To meet the coming demand for Dynamic Investments, the NAOI has created a full array of support resources. They enable financial organizations to incorporate DIs into their product lines quickly, easily and cost-effectively. Among these support resources are the following:

• DIT Information Seminars: e.g. "An Introduction to Dynamic Investments"
• Dynamic Investment Training Classes: e.g. "How to Design Optimal Dynamic Investments for Any Investing Goal"
• Dynamic Portfolio Design Training Classes: e.g. "How to combine DIs in a manner that will out-perform any MPT portfolio"
• DIT Research and Development Partnerships - Opportunities abound!
• Customized Consulting Contracts: e.g. Creating a strategic plan for integrating DIs into your current product line without disrupting existing revenues.
• Portfolio Advisory Agreements: We can provide DI trade signals to any portfolio manager.
• ..... and more

Learning about and understanding DIT and DIs is easy by simply reading The Amazing Future of Investing book discussed above. Taking full and maximum advantage of this once-in-a-lifetime opportunity requires further NAOI support. We have studied DIT applications for over 5 years. We know what works and what doesn't when using this new approach. Working with us to take advantage of this new approach will save you significant time, effort and money. Contact us for more information.

Opportunities and Action Items

Unprecedented opportunities abound in the extremely rare instance where the field of investing makes an evolutionary leap forward. To take full advantage of these opportunities, the NAOI suggests that financial organizations take the following steps:

• Purchase The Amazing Future of Investing book described just above. You can do so in the NAOI Store. Quantity discounts are available for qualifying organizations.
• Consider having the NAOI hold a DIT introductory Education Seminar at your corporate facilities
• Consider an NAOI Consulting Contract or Portfolio Advisory Agreement 
• Consider an NAOI Research Partnership that enables you to work with the NAOI to continue the development of DIT
• Join our NAOI Updates Email List at the bottom of this page. We are releasing new DIT-related Product Developments, Dynamic Investments and DI Applications at a rapid rate. Joining our opt-in list enables you to be among the first to be learn about them

Contact me personally at LHevner@naoi.org or via LinkedIn to discuss these and other cooperative efforts. At this early stage, an exclusive arrangement is possible.

Thank you for taking the time to read this page! At the NAOI we are confident that what you have learned here will provide the foundation of a strategic plan that will enable you to thrive in the dynamic future of investing.