Systematic Strategies

Why systematic investing has historically won in the long run.

Investing boils down to whether the returns to a strategy are worth the risk. Many investors, over the long run, should be able to realize sufficient returns to meet their goals. Yet many fail to do so: The average investor consistently underperforms the financial markets. This is largely due to human nature. Investors have biases and emotions hard-wired into their psychology; these intrinsic weaknesses are especially costly when they affect investment decisions.

One way to defeat biased, emotional investment decisions is to commit to a systematic process with strong long-run statistical support. While tactical trend-following and multi-factor equity investment strategies best exemplify Counterpoint Fund’s systematic investment approach, advisors can benefit from other simple systematic approaches to portfolio management. Systematic rebalancing strategies provide advisors potential for performance improvement from a basic buy-and-hold strategic asset allocation approach.

Asset allocation is a key determinant in driving overall portfolio performance. Adding an annual rebalance represents a very basic example of how systematic strategies can improve portfolio performance. Stock market investments that were left alone during the 2008 financial crisis recovered by the end of 2012. Diversified portfolios that were rebalanced annually recovered faster.

Annual Rebalance vs. Buy and Hold

Source: Morningstar. The referenced indices are shown for general market comparison and are not meant to represent the fund. Index performance is not illustrative of the fund’s performance. Investors cannot invest directly in an index.

[1] Following the 2008 recession, a 60/40 portfolio that was rebalanced annually recovered in less than 36 months, roughly 4 months sooner than the passive 60/40 portfolio without rebalancing. [2] The rebalancing 60/40 portfolio continued to outperform the passive portfolio during periods of recovery. Our example 60/40 model portfolio rebalanced annually on January 2nd, and is composed of 60% S&P 500 Index and 40% Bloomberg Barclays Aggregate Bond Index.

Tactical High Yield: A Rising-Rate Solution for Pension Funds

Inflation puts investment grade bond portfolios at risk, especially when interest rates are already low. Tactical trend following in high yield credit has potential to capitalize on high yield’s historical resilience in rising rate environments, while managing the downside associated with added credit risk.

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Do Cross-Sectional Predictors Contain Systematic Information?

Firm-level variables that predict cross-sectional stock returns, such as price-to-earnings and short interest, are often averaged and used to predict the time series of market returns. We extend this literature and limit the data-snooping bias by using a large population of the literature’s cross-sectional return predictors. We find the literature

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Mutual Funds involve risk including the possible loss of principal. Investors should carefully consider the investment objectives, risks, charges and expenses of the funds managed by Counterpoint Funds. This and other important information about the funds is available in their prospectuses, which can be obtained at or by calling 844-273-8637. The prospectuses should be read carefully before investing. The Counterpoint Funds fund family is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. To reach the Counterpoint sales team, please refer to our contact page.

Important Risk Information

Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results.

© 2024 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.




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