Based on 20+ years of teaching personal investing to the public and working one-on-one with hundreds of average people with money to invest, the NAOI is uniquely positioned to understand how individual investors think. We know that most don’t understand how investing works and see little option but to entrust their financial futures to an advisor who is also a salesperson. And this makes them very uneasy. As a result, far too many people avoid the world of investing altogether and those who are in the market invest far too conservatively. As a result people are not taking full advantage of the wealth generation potential of the market AND the financial services industry is not fully realizing the revenue potential that exists in the market. This needs to change and the NAOI is doing just that.

Unleashing the Full Potential of the Investing Public

The NAOI knows what people want and need from advisors and financial organizations to ease their fears and motivate them to enter the market. We are using this information to create a new investing environment that will bring thousands, if not millions, of individuals into the market as clients of financial organizations.

This change comes in the form of a new investing approach that we call Dynamic Investment Theory and a new investment type that we call Dynamic Investments. Both are designed to not only ease investor fears but to make them excited to get started. You will how is this presentation.

Financial organizations that offer this new approach will finally be able to realize the revenue generation potential that exists today in the public investing market; and it is massive.

The Nature of Change

The source of much that is wrong with investing today is that the methods used are stuck in the past. The current standard for portfolio design is called Modern Portfolio Theory (MPT), an approach introduced to the market in 1952. MPT creates portfolios that are customized to match the risk tolerance of each investor via asset allocation methods and then embraces a buy-and-hold portfolio management strategy.

Markets have changed substantially since the 1950’s - see the chart below - while MPT methods have barely changed at all and they create “static” portfolios that can’t cope with modern “dynamic” markets. They neither enable investors to take full advantage market price uptrends nor do they protect them from price downtrends.

Here are just a few reasons why the unquestioned use of MPT is keeping people out of the market today:

1. MPT Portfolios Are Designed Based on a “Guesstimate”. MPT dictates that portfolios be designed to match the risk profile of each investor. The problem is that people have not been trained to define this variable with any degree of accuracy. NAOI students tell us that they just “guess” when asked this question. Yet, a mistake here can affect an investor's entire financial future.

2. Not a Comprehensive Theory of Investing. MPT uses scientific methods to match an investor’s risk tolerance level with an optimal portfolio asset allocation. That’s it. But the total investing process involves far more than this. A more effective theory of investing would include guidance on how to manage a portfolio on an ongoing basis, including what investments to buy and when.

3. No Market Sensitivity. MPT embraces a buy-and-hold portfolio management strategy. This means that MPT portfolios are not sensitive to changes in the economic environment or to market price movements. As a result, the value of MPT portfolios drifts up and down with the tides of the market with no rules for either taking profits or avoiding losses. This is a major problem that keeps millions of people out of the market.

4. The “Human Error” Risk Component. The MPT portfolio design and management process is rife with human judgments making investing today more of an "art" than a "science". As a result, the effectiveness of a portfolio is too dependent on the advisor / artist chosen to create it. The “human error” risk element is the source of much that is wrong with investing today.

5. MPT Fosters Dependence. Because of the way investing works today is so confusing and complex, individuals see little option but to entrust their financial futures to advisors who are also salespeople and simply hope for the best. Using today’s outdated methods, investors have lost control of their financial futures and they are understandably reluctant to take this risk.

These problems and others that result from the exclusive use of the decades-old MPT portfolio model are keeping millions of potential investors on the sidelines of the market in fear of a process that they don’t understand and, quite honestly, fear. To bring people into the market and improve the investing experience of those in the market, the way we invest needs to change at a fundamental level.

The Change Needed

To evolve the world of investing into the 21st Century a new approach to portfolio design and management is needed; one that is comprehensive, based on scientific methods and creates investment that are automatically “sensitive” to market changes. This is what the NAOI has developed in the form of Dynamic Investment Theory (DIT) that is introduced on the next Slide. The chart below shows that MPT was created when markets were a far less volatile place than they are today while DIT was designed to not only cope with modern markets but to take full advantage of them. DIT is the disruptive innovation that will usher in a new era of investing - an faster than you may think.

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