The October Effect Story

The October Effect story:

The foundation for October Effect, Ltd. is active asset management with an eye on risk. The ideas and foundation behind October Effect, Ltd date back to 1982 and the market change that occurred that fall. The bear markets that followed in the fall of 1987, the fall of 2000 and again in the fall of 2008 have confirmed that risk management needs to be a paramount ingredient in your investment discipline.

October Effect, Ltd came into existence in November of 2015 to fulfill this needed investment discipline. Through the use of fundamental and technical analysis, our active investment discipline may provide consistent returns and avoid a portion of the unfavorable losses. Using a disciplined tactical approach, we truly believe that taking fewer risks can achieve a better long-term result.

The philosophy:

While a buy-and-hold philosophy has been accepted by much of the market, and realizing early on we were not willing to endure the painful declines included in the buy-and-hold philosophy,which often includes many years of agonizing frustration. Some investors have called this passive approach a sit and take it strategy. That’s because when the market declines, or your chosen asset class falls out of favor, maintaining that asset allocation means your portfolio may dwindle for years. And losses are hard to recoup.

We at October Effect, Ltd. have discovered the value of avoiding losses even if we accept some moderate gains. That’s why we believe in being conservative during potential down markets. On the other hand, when those conditions are appropriate, we do invest more fully benefiting from the upside.

Our investment approach incorporates an asset allocation strategy, with its foundation using dividend growing stocks for the long-term trend. Open-ended mutual funds are employed for the intermediate-term trends. Then ETF’s (electronically traded funds) are called upon for the short term trends. The entire portfolio is then monitored using an active management strategy, driven by tactical considerations. Of course, it is tailored to an individual client and their unique situation.

The mathematics:

One of the major building blocks of October Effect, LTD investment philosophy is the importance of avoiding detrimental portfolio loss. All portfolios incur loss at some point in time but it is extremely important to keep those losses manageable. The key to long-term investing success is managing the downside risk, which provides for your peace of mind.

The following simplified example examines the mathematics of advances and declines:

Investment A investment B

year one 19% 35%

year two - 7% -17%

year three 14% 18%

year four -5% -19%

The average investor would select investment B based solely on its larger return in year one, however, if you annualize the numbers, the importance of avoiding a catastrophic loss is very apparent.

Annualized 5% 1.8%

Reason for this outcome is simple mathematics, which many investors ignore.

Let’s say your account starts with $100,000.00 and you lose 50%. Your account is now worth $50,000, and in order to get back to its original investment you need a return of 100%. In contrast if your account had declined 10% it would be valued at $90,000 and in order to get back to your original investment you would only need a gain of 11.1%.

Picking a portfolio manager for your hard-earned assets is one of the most important financial decisions you will make. We believe risk management should be a primary consideration.

Why partner with October Effect, Ltd:

Experience: The combined experience of our investment committee exceeds 60 years

Unconstrained flexibility: Our management strategies allow us to invest anywhere needed to meet your investment goals. This is important for in today’s fast changing market environment you must have the freedom to use any asset class when it’s required.

Advantages of a boutique firm: October Effect, Ltd is a small town firm with small town values ignoring the pressures of Wall Street. The ability to have a firm located outside of Wall Street’s pressures allows October Effect, Ltd the courage to act on its own observations thereby avoiding crowd mentality, and allowing for independent investment choices which may protect you against catastrophic loss.


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