Hello. My name is Leland Hevner. I am the President of the National Association of Online Investors (NAOI). Founded in 1997, we are a 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 few of my LinkedIn contacts pre-release access to a recently completed NAOI Research Report entitled “The Power of ETF Combinations”. Its cover is pictured at right.

This seminal Report introduces to the market a new approach to portfolio design and management that gives investors the higher returns they want with the stronger protections from loss that they need to participate in the market with confidence and without fear.

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

About the Research Report

Written based on a multi-year R&D project by the NAOI, using extensive input from both individual investors and investing professionals, this seminal Research 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 very powerful, ETF-based investment vehicle called Dynamic Investments (DIs) that are designed to 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; and they do so with lower risk and no active management required.

Plus, when added as building blocks to buy-and-hold, MPT-based portfolios, DIs also make them market-sensitive 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-type-of-choice in the future of investing.

The Demand for Dynamic Investments is Growing Fast

The NAOI is currently teaching the use of DIs throughout our extensive education network. Students tell us that this is finally the investment type and portfolio design approach that will enable them to participate in the market with confidence and without fear. And they will search for investment advisors that offer them. If NAOI students can’t find one, they will be able to implement them on their own using the NAOI’s “Dynamic Investment User’s Manual” and an online broker.

Meeting the Demand

The NAOI Research Report shows readers how to easily create DIs for a full spectrum of investing goals by simply combining existing ETFs in the DI format. It then shows how DIs can be used to create superior portfolios, investing strategies and investor solutions that are simply not possible today.

Readers will also learn how financial organizations that offer DIs in their product line will give them a massive advantage over competitors that elect to remain stuck in the “MPT box”.

A “Glimpse” Into the Future of Investing

The NAOI Research Report does not simply “tweak” the way investing works today. It changes how portfolios are created and managed at a fundamental level in order to more effectively cope with the challenges of modern markets and better meet the goals of both investment buyers and sellers. The information presented below provides a quick overview of the National Association of Online Investors (NAOI) as well as how the introduction of Dynamic Investments and Dynamic Portfolios will usher in a simpler, safer and more profitable future of investing.

About the NAOI

Founded in 1997 the National Association of Online Investors (NAOI.org) is the market’s premier provider of objective investing education. Our mission statement contains 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 investment products, investing portfolios, investing strategies and investor solutions that are not possible today.

The fact that the NAOI closely with both investment buyers and sellers to meet the goals of each makes us unique in the financial services industry.

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 structured and positioned to change how investing works today at a fundamental level and then to make this change an integral component in a simpler, safer and more profitable future of investing.

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 today’s volatile 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.

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 nor give them the strong protection from significant losses they need to enter the market without fear.

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 extensive R&D project to find an MPT alternative, or supplement, that more effectively copes with modern markets and better meets the wants/needs of investors.

Following a multi-year effort, using extensive input from both the investing public and the financial services industry, we discovered and developed the change needed in the form of a new approach to portfolio design and management called Dynamic Investment Theory (DIT).

Introducing Dynamic Investment Theory (DIT)

DIT finally gives the world of investing an alternative to Modern Portfolio Theory (MPT) that is in universal use today. There are many reasons why DIT methods produce higher returns with lower risk than today’s MPT portfolios. Among them are the following:

1. MPT portfolios are designed to match the risk profile investors and must be customized for each. DIT portfolios are designed to maximize gains and minimize risks in all market conditions. This is a universal goal that works for all investors. No customization is needed.

2. MPT portfolios are designed to hold both winning and losing investments at all times e.g. stocks and bonds. DIT portfolios are designed to hold only investments that are moving up in price while avoiding or quickly selling those that are moving down.

3. Trades in MPT portfolios are made based on subjective human judgments and are vulnerable to bad decisions. Trades within DIT portfolios are made automatically based on objective observations of empirical market data. Their is no ”human risk” element involved.

4. The management of MPT portfolio cannot be automated. The management of DIT portfolios is easily automated.

To make the above portfolio design and management advantages possible, DIT sets the logic and rules for the creation of a new investment type called Dynamic Investments as discussed just below and in much greater detail in the Research Report.

Introducing Dynamic Investments (DIs)

DIs are not just another investment type like ETFs or Mutual Funds. They are a completely new investment type that takes advantage of the predictive power of market/asset-class price trends and the protective power of trailing stop loss orders. These two factors make DIs “market-sensitive” and capable of outperforming virtually any ETF or Mutual Fund being offered today in all market conditions - bear or bull - with greatly reduced risk and no active management required.

The DI Structure and Components

The diagram below shows the components of all Dynamic Investments followed by an explanation of each. The components with blue lettering are variables defined by a DI designer to meet an unlimited number of investing goals. A DI can serve as an investor’s total portfolio or they can be used as building blocks in today’s MPT-based portfolios to enhance returns and reduce risk. We call DI-enhanced portfolios “Dynamic Portfolios”. They are discussed below on this page.

The Dynamic Investment (DI) Components

Below is a brief overview of each of the three components of Dynamic Investments. Each is described in more detail in the Research Report.

• 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 where they serve as 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.

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

• 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 holds a Cash-Equivalent DI 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 at a Review Event the DI holds a Cash-Equivalent ETF until the next Review.

DI designers can create an unlimited number of DIs for a full range of investing goals by defining each component.

Examples of the Power of Dynamic Investments

The unique features of DIs enable performance that is not possible today. Following are three examples of how DIs can be used along with the returns they produced for the backtest period from 2008 - 2023.

The NAOI “Core DI”: + 15.6% Average Annual Return

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 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 for the two investment types;.the higher the value, the lower the risk.

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

The table shows that the ultra-simple Core 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 NAOI “Alpha DI”: + 20%+ Average Annual Return (2008-2023)

The “Core DI” discussed above produced outstanding returns with lower risk than virtually any MPT portfolio for the backtest period used. However, by rotating among FOUR carefully selected and tested ETFs instead of two, another NAOI-designed DI called the “Alpha DI” delivered average annual returns of 20%+ for the period from 2008-2022 backtest period.

The Table below is the “DI Data Sheet” for the Alpha DI. It contains all of the information needed for a designer to create and manage this high-performance Dynamic Investment.

Click the button below to view the year by year return of the Alpha DI. 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. An unlimited number of other DIs for a full range of investing goals are possible.

The NAOI “Risk Reducer” DI

DIs can be used to dramatically lower the risk of high-return, high risk ETFs. These are ETFs that are rarely found in MPT, buy-and-hold portfolios. The potential losses from holding these ETFs are simply too high for the average investor to accept. DIs however can capture the high returns of these ETFs while limiting the risk as shown in the following example.

Below is a DI Data Sheet for a rather exotic ETF available in the market that uses various techniques to capture 3 times both the gains and losses of the stock market. Thus it can produce extremely higher returns but also suffer extremely negative losses. Advisors rarely place this ETF in a buy and hold, MPT-based portfolio as the risk of significant losses is simply to high.

The DI, however, is designed to capture the gains of ETFs like this by purchasing and holding them ONLY when they are moving up in price and avoiding, or quickly selling them when they are moving down in price. The price trends of this type of ETF are detected by the periodic review of the DI and significant losses are stopped by the Trailing Stop Loss order.

The NAOI has designed a DI that works with this 3X Stock Market ETF. Its performance is shown below for the period from 2008-2023.

 The NAOI “3X Bull Market DI”: +44% Average Annual Return (2008-2023)

“Experts” will claim that this level of returns with minimal risk is impossible. The NAOI Research Report show that these experts are wrong. Using the NAOI “Risk Reducer DI” can achieve similar results by inserting virtually any volatile ETF in its Dynamic ETF Pool.

Introducing Dynamic Portfolios (DPorts)

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 the portfolios market -sensitive as well by periodically and automatically adjusting their asset allocations to capture gains and avoid losses far more effectively than any rebalancing strategy in use today.

We call DI enhanced MPT portfolios “Dynamic Portfolios” and firmly believe that they will become the investment type-of-choice in the future of investing.

The Dynamic Portfolio Components

The diagram below shows an overview of the structure of Dynamic Portfolios. The boxes colored in green are new to portfolio design methods used today. The chart shows the creation of a portfolio that uses both a buy-and-sell DIT Segment using only ETFs and a buy-and-hold MPT Segment using today’s portfolio design methods. The percentage of portfolio money allocated to each Segment is at the discretion of the designer.

The design of Dynamic Portfolios is discussed in detail in the Research Report.

The Research Report shows how to design high-performance, low-risk Dynamic Portfolios that outperform virtually any MPT-based portfolio being offered today.

A New World of Diversity Elements

Key to the higher performance of Dynamic Portfolios is that they take advantage of 5 diversity elements (more are possible) while MPT portfolios use only two. They are as follows.

Diversification Elements used by Dynamic Portfolios

• Company Diversity

• Asset Class Diversity

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

• Time Diversity - Resulting from the DIT Segment’s periodic review of the ETF(s) it holds and making trades as needed

• Trade Catalyst Diversity - Subjective Human Judgments in the MPT Segment and Objective Market Observations in the DIT Segment.

The Research Report shows hot the diversity elements work in DPorts and why more are possible.

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.

Thus, while changing asset allocations in today’s MPT-based portfolios, typically on a yearly basis, can result in significant losses in volatile markets, DPorts are capable of automatically changing asset allocations as need to capture returns and stop losses in response to changing market trends.

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.

Revolutionizing 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 portfolio allocations 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.

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.

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.