Removing emotion and limiting downside exposure
Beacon Capital Management is dedicated to meeting the needs of investors, and this includes managing the risk associated with their investments. We believe the greatest risk to investors with finite goals is severe market volatility. This volatility can result in double-digit market loss, which can be made worse from: knee-jerk buy or sell reactions; over-exposure in a single market sector; or, holding on to an investment for too long and “hoping” it will recover, all the while the market continues on a downward spiral.
Losses can be more powerful than gains, and it is our contention that the average investor does not have the time to wait to get back to where they started.
At Beacon, we believe that risk is not the only road to return. Our philosophy is to work to capture market gains while minimizing market risk. The three pillars to our approach include:
Effective risk management begins with strong diversification. No one knows which way the market will go, and overexposure or underexposure to any market sector can dramatically impact the overall performance of a portfolio. We invest equally over the market sectors to help protect from this risk.
Effective risk management attempts to stop investment losses before they become destructive. For this reason, we have a stop-loss strategy in place. If our proprietary index drops a predetermined amount, the stop-loss triggers and automatically sell equities within the portfolio.
Effective risk management eliminates human emotion from the investment equation. Through our mechanical investment management approach, we maintain our discipline and react to changing markets only when our predetermined rules dictate.