Hello. My name is Leland Hevner. I am the President of the National Association of Online Investors (NAOI). Founded in 1997, we are a market leading investor-education, investment-research and financial consulting organization. The NAOI is unique in that we work with both investment buyers (our students) and sellers (our consulting clients) to meet the goals of each.

Welcome to an invitation-only Web page that gives a select group of my LinkedIn contacts pre-release access to a recently completed an NAOI Research Report entitled “The Power of ETF Combinations”. This 64-page Report will shape the future of investing at a fundamental level. Its cover is shown at right.

Click here to view the Report’s Table of Contents.

Written based on a multi-year R&D project by the NAOI, using extensive input from both the investing public and investing professionals, this seminal Report introduces an evolutionary approach to portfolio design and management that we call Dynamic Investment Theory (DIT).

DIT defines the logic and rules for the creation of a simple, but powerful, ETF-based investment vehicle called Dynamic Investments (DIs) that automatically change the ETF they hold based on a periodic (e.g. monthly or quarterly) sampling of asset/market price trends.

By being “market-sensitive”, extensive testing shows that DIs produce returns that are consistently and substantially higher than virtually any standalone ETF or mutual fund being offered today; with lower risk and no active management required.

Plus, when added as building blocks to today’s buy-and-hold, MPT-based portfolios, DIs make them market-sensitive as well and capable of automatically changing their asset allocations to capture gains and avoid significant losses in all market conditions - bear and bull. We call DI-enhanced, MPT-based portfolios “Dynamic Portfolios”. They will be the investment-of-choice in the future of investing.

The NAOI is currently teaching the use of DIs throughout our extensive education network. Students tell us that this is finally the investment type that will enable them to participate in the market with confidence and without fear. And they will search for investment advisors that include them in their product offerings.

Order Your “Pre-Release” Copy of the NAOI Research Report Today

Click the button just below to go to a page where you can purchase the NAOI Research Report. Or, for more information, continue reading the content beneath the purchase button to learn how integrating Dynamic Investments and Dynamic Portfolios in your investment product line will immediately give your organization a major competitive advantage in today’s crowded market of financial services.

More Information

The information presented below provides a quick overview of the NAOI and why the introduction of Dynamic Investments and Dynamic Portfolios are the change needed to enable individuals to take full advantage of the wealth generation power of equity markets with confidence and without fear. And why financial organizations and advisors that offer them will hold a significant competitive advantage in a crowded field. The NAOI Research Report shows, step-by-step, how this is done.

About the NAOI

Founded in 1997 the National Association of Online Investors (NAOI.org) has two main goals as follows:

1. To empower individuals to invest with confidence and success via objective investor education, the development of innovative investment types / methods and the use of NAOI-curated online resources.

2. To enable financial organizations, developers and advisors to gain a significant competitive advantage by creating superior investing portfolios, investing strategies and investor solutions that better meet the wants and needs of both retail and institutional clients.

Thousands of individuals have taken our investing courses, read our published books and/or attended our college classes. And the NAOI has consulted with numerous financial organizations to help them design and offer investment products that we know investors will buy.

It is important to note that the NAOI does not sell ETFs or any other investment type and we are not certified investment advisors. We are investing educators, investment researchers, and financial consultants. Click the button below to see a diagram of how the NAOI is uniquely positioned to change how investing works today at a fundamental level.

Why Investing Change Is Needed

As the NAOI teaches our students, they also teach us. As a result we know that far too many people who need investing income today are leaving, or not entering, the market. Why? Because they are afraid of owning the buy-and-hold portfolios recommended to them by advisors in modern uncertain and increasingly risky markets. They view the potential of significant losses when markets crash (an event that happens on an average of every 6-7 years) as being just too great. Many see purchasing annuities as a safer option than the portfolios they are offered

At the root of this problem is the market’s exclusive and unquestioned use of Modern Portfolio Theory (MPT) to design and manage portfolios. The MPT approach was introduced in the 1950s when markets were a far different place. While markets have evolved significantly since then, MPT has barely changed at all and the buy-and-hold portfolios it creates neither enable investors to take full advantage of market gains or protect their portfolio value from significant losses.

Click the button below to review just a few of the problems of using MPT methods to design and manage portfolios in modern markets. More are discussed in the Research Report.

The Change Needed: Market-Sensitive Investments and Portfolios

To stem, and reverse, the current outflow of people from the market the NAOI initiated an R&D project to find an MPT alternative, or supplement, that would more effectively cope with modern markets and better meet the wants/needs of investors.

Following a multi-year effort, using extensive input from both the investing public and the financial services industry, the NAOI developed the change needed in the form of a new approach to portfolio design and management called Dynamic Investment Theory (DIT). This MPT alternative sets the rules for the creation of an innovative, ETF-based investment vehicle called Dynamic Investments (DIs).

Introducing Dynamic Investments (DIs)

DIs are not just another investment type like ETFs or Mutual Funds. They are a completely new investment category, one that uses the predictive power of market/asset-class trends to increase returns and protective power of trailing stop loss orders to reduce significant significant losses. Today’s MPT portfolios use neither of these valuable resources.

In the NAOI Research Report you will learn that DIs work with combinations of existing ETFs, each of which thrives in different market conditions. These are the DIs “purchase candidates”. On a periodic basis (e.g. quarterly or monthly) the DI automatically reviews these ETFs and buys, or retains, only the one ETF having the strongest price uptrend. It is then held until the next review when the selection process is repeated. A Trailing Stop Loss Order is placed on the ETF purchased to stop significant losses should its price fall during the short period it is held. By being “market-sensitive”, extensive testing shows that DIs consistently produce higher returns with lower risk – in all market conditions – than any standalone ETF or mutual fund in the market today, with no active management required.

The DI Structure and Components

Below is a diagram that shows the components of all Dynamic Investments. The components with blue lettering are variables defined by a DI designer. One DI can serve as an investor’s total portfolio or they can be used as building blocks in MPT-based portfolio in order to enhance returns and reduce risk. We call DI-enhanced portfolios “Dynamic Portfolios” and they are discussed below on this page.

The Dynamic Investment (DI) Components

Below is a description the components of all DIs along with their purpose and data flows.

1. The Dynamic ETF Pool (DEP) - DIs work with a groups of existing ETFs (typically from 2 to 5 ETFs) selected by the DI designer, each of which thrives in different market conditions. These ETFs are placed in the DI’s DEP. They are the DI’s “purchase candidates”. An unlimited number of DIs can be created for a full range of investing goals based on the ETFs placed in the DEP.

2. The Review Period - On a periodic basis (e.g. monthly or quarterly as selected by the designer) the DI reviews each ETF in the DEP to identify the one with the strongest price uptrend. This is the ETF that is purchased, or retained if already owned, and held by the DI until the next Review when the selection process is repeated.

3. The Trailing Stop Loss Order (TSL) - A TSL is placed on the ETF held by the DI to stop significant losses during the short time it is held between Review events. The designer determines the TSL’s “sell” trigger - typically a 10-12% drop from the highest price the ETF reaches while being held. When a TSL sale is triggered the ETF is sold and the DI stays in Cash until the next Review event when, again, the strongest uptrending ETF in the DEP is purchased. In the rare case where no ETF in the DEP is trending up the DI remains in Cash.

The ETFs purchased by a DI are typically placed in the DIT Segment of a Dynamic Portfolio as discussed below on this page.

The Benefits of Using Dynamic Investments

Dynamic Investments are a unique investment vehicle that delivers benefits to investors that are not possible today. Below are listed just a few. More are discussed in the Research Report.

• A Simple, but Powerful Investment Type. DIs are Easy to Understand and Create. A complete product line of DIs can be created for a full range of investing goals by simply changing the ETFs held in the DI’s Dynamic ETF Pool (DEP).

• Higher Returns with Lower Risk. By being “market-sensitive” DIs are capable of producing higher returns with lower risk than any ETF or Mutual Fund being offered today. Refer to the table just below on this page.

• Positive Returns in All Market Conditions. DIs are capable of producing positive returns in all market conditions, bear or bull, with no active management required.

• Easily Automated. The ETF selection process used by DIs is based on objective observations of market data, with no subjective human judgments involved. As a result the trading process can easily be automated.

• Superior Portfolio Building Blocks. When used as building blocks in today’s MPT portfolios, DIs both enhance their returns and lower their risk as discussed just below on this page.

• DIs Significantly Increase the Size and Value of Current ETF Product Lines.. By “productizing”, and thus “monetizing”, combinations of existing ETFs in the DI format shown above, DIs uncover massive value currently lying dormant in current ETF product lines without the need to create a single new ETF.

• DIs Enable “The Productization of Investing”. This is the Holy Grail of the financial world that experts have been seeking for decades. They haven’t found it. With the introduction of DIs, the NAOI has.

Dynamic Investments change how investing works today at a fundamental level. The Research Report shows how this change works and how financial organizations can take advantage of it immediately after reading the last Section of the 64-page Report.

The Power of Dynamic Investments - An Example

To illustrate the returns potential of Dynamic Investments, the table below shows the performance of a very simple DI designed by the NAOI that rotates only between a Total Stock Market ETF and a carefully selected Long-Term Government Bond ETF for the period from 2008-2023. We call this the NAOI “Core DI”. In the table its performance is compared to the returns of of a generic 60% Stock / 40% Bond, MPT-based portfolio holding the same ETFs and for the same time period.

At any one time the Core DI holds either the Stock ETF or the Bond ETF as determined by a quarterly sampling of the price trends of each. The generic 60/40 MPT portfolio holds both ETFs at all times with, the allocations shown, and rebalanced quarterly. The Sharpe Ratio column in the table is a measure of investment risk - the higher the better.

During this period the Core DI held the Stock ETF for 2195 days and the Bond ETF for 1582 days. DI trades were automatically signaled by the DI’s built-in trading system that can easily be automated so no active management is required. Thus, this DIs can be bought and held by investors for the long-term while DI automatically make trades to capture gains and avoid, or stop, losses.

You can see in the table that this ultra-simple DI produced returns that were close to double that of a generic 60/40 MPT portfolio with lower risk. And It did so during a backtest period (2008-2023) that saw two significant market crashes and an unprecedented bull-market run.

The “Alpha” Dynamic Investment: 20%+ Annual Returns from 2008-2023

The “Core DI” discussed above produced outstanding returns with lower risk than virtually any MPT portfolio. However, by adding two additional ETFs to the DEP and rotating among FOUR ETFs instead of two, another NAOI-designed DI called the “Alpha DI” delivered even higher performance for the 2008-2022 backtest period. Click the button below to view its yearly returns and average annual return for this period. You will see that this powerful DI earned and average annual return of 20%+. This performance is impossible using MPT methods only.

Readers of the NAOI Research Report will learn how the Alpha DI was created, how it is managed and the specific ETFs it uses. This is only one example of a high-performance DI design. The Research Report gives readers the knowledge and tools needed to design an unlimited number of others for a full range of investing goals.

Introducing Dynamic Portfolios (DPorts) - This Is the Future of Investing

While single DIs can be used as an investor’s total portfolio, the NAOI is not suggesting that they replace MPT-based portfolios. DIT and MPT methods work quite well together. The Research Report shows that by using DIs as building blocks in today’s MPT-based portfolios they make them market -sensitive as well and both increase portfolio returns and lower risk. We call DI enhanced MPT portfolios “Dynamic Portfolios”. The Research Report shows how they will usher in a simpler, safer and more profitable future of investing - for both investment buyers and sellers.

The diagram below shows an overview of how Dynamic Portfolios are created. The boxes colored in green are new to the portfolio design process used today. They enable the creation of portfolios that contain both a new, market-sensitive, buy-and-sell Segment and a traditional, MPT-based buy-and-hold Segment.

Portfolios of the future will have two Segments as shown in the above diagram and explained below. The portfolio designer will decide the allocation of money to each Segment.

1. The MPT Portfolio Segment

Today’s portfolios use this Segment only.

• The MPT Segment holds one or more of the investments types used in today’s MPT-based portfolios. These investment types are shown at the top of the diagram.

• The goal of this Segment is to match each investor’s risk profile via allocation of money typically between Stocks and Bonds.

• This Segment uses a buy-and-hold management strategy with, typically, yearly rebalancing. As a result, the value of this Segment moves up and down with the tides of the market and is dangerously vulnerable to market crashes.

• Advisors select the investments to be placed in this Segment based primarily on fundamental analysis and subjective human judgments.

• This Segment purposely holds both winning and losing investments at all times to reduce risk. But this “diversity” element also reduces returns.

Other problems related to the use of MPT-only methods are found at this link.

2. The DIT Portfolio Segment

This is a new Portfolio Segment that uses DIT as opposed to MPT methods. It is described in the NAOI Research Report. Below are just a few of its unique features, more are discussed in the Research Report.

• The DIT Segment holds one or more ETF(s) selected by the DI building blocks used. Refer to the above diagram.

• The ETFs in the DIT Segment automatically change in response to market/asset price trends. This makes the Segment market-sensitive and capable of producing positive results in both bear and bull markets. By doing so it boosts the total portfolio’s returns while also reducing its risk.

• The ETF trades made in this Segment are based on objective observations of market/asset trend data. As a result, the trading process can easily be automated as no human judgments are involved. This process eliminates the risk of human error when selecting investment purchases.

NAOI students tell us that the DIT Segment in a portfolio gives them the returns they want and the stronger protection from significant losses they need to enter the market without fear. And they will search for advisors that include this Segment in the portfolios they offer.

The Benefits of Using Dynamic Portfolios (DPorts)

The addition of the DIT Portfolio Segment changes how investing works today at a fundamental level. It does so by enabling the following benefits.

• Enabling Higher Returns without Higher Risk. MPT methods say that higher returns come only with higher risks. DIT methods show that this “MPT-rule” is wrong.

• Automatic Portfolio Allocation Adjustments. DPorts automatically adjust asset allocations to take advantage of current market conditions. By doing so they eliminate the significant risks associated with the yearly rebalancing used by most MPT-based Portfolios being offered to investors today.

• More Diversification Elements. The DIT Segment enables Dynamic Portfolios to take advantage of FIVE diversification elements and more are possible. MPT portfolios use only two. And while MPT diversity elements both lower risk and lower returns, DIT diversity elements lower risk while increasing returns. The five DPort diversity elements are:

  • Company Diversity - Used by both MPT and DIT

  • Asset Class Diversity - Used by both MPT and DIT

    The following are diversity elements are used ONLY by the DIT Segment:

  • Management Strategy Diversity - DIT “Buy-and-Sell” and “MPT Buy-and-Hold”

  • Time Diversity - The DIT Segment automatically changes its holdings on a periodic basis - e.g. quarterly and/or monthly making it “time” diverse.

  • Trade Catalyst Diversity - Trades are triggered in the DIT Segment based on objective observations of market trends and can be automated. Trades in the MPT Segment are made based on subjective human judgments and cannot be automated.

More benefits enabled by Dynamic Portfolios are described in the NAOI Research Report.

A New “Universal Portfolio” Configuration - The 30/20/50 Portfolio

The world of investing today suffers greatly from the lack of a simple, but profitable, portfolio that works for all investors regardless of their risk profile. The NAOI believes that today’s generic 60% Stock/ 40% Bond MPT Portfolio is dead; we no longer teach it to our students. Instead, we are now teaching the benefits of a 30% Stock / 20% Bond / 50% Dynamic Investment configuration as shown in the diagram below. It holds both and MPT Segment, using a buy-and-hold strategy, and a DIT Segment, using a buy-and-sell management strategy.

This very simple DPort works with only three ETFs: a Total Stock Market ETF, a Long-Tern Government Bond ETF and a Cash-Equivalent ETF. The MPT Segment holds 30% Stocks and 20% Bonds at all times, rebalanced quarterly. The DIT Segment holds either 100% Stocks or 100% Bonds or a 100% Cash Equivalent ETF at all times depending on the price trend of each at a quarterly review. Thus, the following portfolio allocations occur automatically at a periodic review:

• When Stocks are trending up the DPort holds 80% Stocks and 20% Bonds.

• When Stocks are trending down the DPort holds 30% Stocks and 70% Bonds.

• When both Stocks and Bonds are trending down (as they did in 2022 when MPT portfolios were decimated) the DPort holds 30% Stocks, 20% Bonds and 50% Cash.

NAOI Universal Portfolio Returns for 2008-2023

From 2008 - 2023 the NAOI Universal Portfolio earned an average annual return of +11.60% while a generic 60/40 MPT portfolio produced an average annual return of +7.9%. And it did so with stronger protection from significant losses.

The Productization of Investing

The goal of the NAOI Universal Portfolio is to maximize returns while minimizing risk in all market conditions - bear or bull. This is a goal that works for all investors regardless of their risk profile. And since trades are based on objective observations of market trends this portfolio and others using the same approach can be viewed as “investing products” that can be sold off-the-shelf with no customization for each investor required. As a result, DIs and DPorts open the doors wide to the “productization of investing” - the Holy Grail of the financial world that experts have been seeking for decades. They haven’t found it. The NAOI has and the world of investing changes at a fundamental level; greatly benefiting both investment buyers and sellers.

DPorts will Revolutionize the Retirement Investment Industry

As just one example of the Universal Portfolio’s use, it is the perfect default investment type for all retirement accounts. It is far more profitable and less risky than the outdated Target Date funds used for this purpose today. Advisors and financial organizations that offer this retirement portfolio will dominate the multi-billion dollar retirement market. The Research Report shows how.

The Effects of DPort Segment Allocations

While the DPort configuration shown above meets the needs of most investors, its performance can be changed by simply adjusting the allocation of money to each Segment. The table below shows how increasing the allocation of portfolio money to the DIT segment increases returns.

It is important to note that the DIT segment of this portfolio is absolutely protected from market crashes via the use of a Trailing Stop Loss Order placed on the ETF being held. This benefit by itself, if properly marketed, will enable advisors to attract far more clients than they do today.

There Will Be Skeptics

The NAOI is well aware that any change in the financial world as significant and potentially disruptive as the introduction of Dynamic Investment Theory, Dynamic Investments and Dynamic Portfolios will meet resistance. Click the button below to read several criticisms of this new approach by investing professionals who have peer-reviewed this new approach along with our response to each. No criticism that we have heard to-date has survived close scrutiny.

Why DIT Methods and the DI Investment Type Cannot Be Ignored

Dynamic Investments and Dynamic Portfolios are more than just a “good idea”. The NAOI has been teaching their use throughout our extensive education network for over two years and demand for this new approach is growing fast.

The DI User’s Manual, shown at right, is the “textbook” used by the NAOI to teach our students how DIs work, how to easily create them and the benefits of including them in their portfolios. We also show students how to create and manage DIs on their own using an online broker to make the trades that DIs signal. But the NAOI suggests that students first look for an advisor that offers DIs and DPorts. We will give to them a list of those that do.

Investing professionals will soon be asked by potential clients if they offer Dynamic Investments. To answer their questions the NAOI is making the Dynamic Investment User’s Manual shown at right available to advisors via the links provided just below. You can order just the User’s Manual or both the User’s Manual and the NAOI Research Report together, at a discounted price, by clicking the second link shown below.

Click Here to Order the DI User’s Manual shown above at right>>

Or Click Here to Order Both the Research Report and the User’s Manual>>

The Benefits of Working with the NAOI

Readers of the NAOI Research Report will be able to create and use DIs and DPorts immediately after finishing the Report’s final Section. However, advisors and financial organizations that work with the NAOI to design optimal DIs and DPorts and bring them to the market first with a highly effective marketing campaign created with input from the NAOI, will benefit the most. The types of cooperative agreements offered by the NAOI are discussed in the Research Report. A summary of these is found by clicking the button below.

Still Have Questions or Need More Information? Let’s Talk.

The NAOI’s constant interaction with the both individual and institutional investment buyers shows us that it is time for the financial world to evolve from the 1950s, when MPT was introduced, to the 21st Century. Dynamic Investment Theory and DIs are the evolutionary change needed. And financial organizations that offer this updated approach first will benefit the most.

If you are skeptical of this new approach, have questions about it or simply need more information, feel free contact “Leland Hevner” on LinkedIn or directly at LHevner@naoi.org and let’s talk. If emailing please place NAOI REPORT in the subject line of the email.