Rocky Mountain PWM focuses on producing reasonable returns for all clients, regardless of the state of the market at any given time. Our portfolio managers use proprietary research and proven economic business cycles to achieve these returns.
At Rocky Mountain Private Wealth Management our portfolio managers value the economic business cycle and its concepts. The basic premise of this theory provides that there are two types of markets: good and bad. It is vital for the long-term performance of any account to have a strategy encompassing both types of environments. When the markets are rising, the expectation is that anyone and everyone can make money. However, when market conditions are weak and the economy is soft, most investors suffer losses that can greatly affect their overall returns.
As the chart below illustrates, Investor A makes double the return in Year 2, but he still has less money because of the substantial loss he suffered in Year 1. Furthermore, he has lost 2% of his original investment. This chart confirms that significant losses can be particularly damaging to the overall, long-term success of an investment. It can take years to recover from these losses and you can lose the earning power of the assets that you once had, as does Investor A in the example below.
| Heading | Investor A | Investor B |
| Starting Balance | $ 100 | $ 100 |
| 1st year return | -30% | -10% |
| Value after 1st year | $ 70 | $90 |
| 2nd year return | 40% | +20% |
| Value after 2nd year | $ 98 | $ 108 |
It is important to understand that most individuals overlook the key to investing: if you limit your losses in bad markets, it is not necessary to make the highest return in good markets. A more stable approach to investing will generate acceptable returns without taking unnecessary risk.
To further understand this concept, see a collection of the worst bear markets over the last 100 years, by clicking here *EXHIBIT OF WORST BEAR MARKETS*. This chart highlights the cyclical nature of the economy and validates that although the timing is unpredictable, each stage of the business cycle will appear. A certainty of the stock market is that it will go up and go down. The real questions that remain unanswered are when, and by how much?