The analytical approach

Finding the Rules of the Game

Pivot Point Advisors analyzes large amounts of historical data to help construct a framework for making financial decisions. Of course history does not repeat itself and investment choices that would have worked in the past will not necessarily work in the future. However, some basic ground truths seem to remain true decade after decade.

The Sanity Check

From these statistical rules we select the ones that make sense and discard implausible ones. For example, if we found that historically companies whose name starts with the letter 'A' perform better than their peers, we would discard this rule. Ground rules that do make sense provide a solid framework for selecting investments.

A well-known example of such a ground rule is that stocks return more than bonds, compensating investors for the higher level of risk. There are many similar rules that are part of our framework for making financial decisions. However, the market does not offer adequate compensation for all risks. Pivot Point Advisors attempts to identify investments that provide good risk-adjusted returns and avoid areas where the returns are too low for the investment risk.

The Benefit

This quantitative approach helps Pivot Point Advisors maintain discipline in all market environments. It keeps us from getting too excited about investments that are working well and it helps us to stay the course when our strategies are lagging the market. In the long run, this approach should result in strong and consistent returns that avoid the worst of the normal boom and bust cycle of the financial markets.