SISTM: What is it and How Does it Work?

SISTM - short for Sage Investment Strategies Timing Model - is an advanced mathematical model that generates mechanical "buy" and "sell" signals used by investors to successfully manage their portfolios. The SISTM evaluates a carefully selected mix of index funds and Exchange Traded Funds (ETFs) representing a broad spectrum of asset classes that are strategically allocated within the Sage Investment Strategies model portfolios. Index funds and ETFs are the low-cost investment vehicles of choice to represent asset classes such as U.S. large and small capitalization stocks, international and emerging market stocks, U.S. and international real estate stocks and REITs, commodities, foreign currencies, bonds and money market funds. Our computerized SISTM determines both what and when to buy and sell, enabling investors to achieve more consistent returns with significantly less risk than a buy-and-hold strategy.

Our SISTM satisfies investor needs for capital growth and preservation by harnessing the cyclical nature of financial markets and recognizing trends. Because markets for asset classes are cyclical and often uncorrelated with each other, we can generally expect that at any point in time we will find some asset classes whose indexes are trending upward and some asset classes whose indexes are trending downward. Moreover, the SISTM takes advantage of the cyclicality and determines when and where to be invested in each asset class.

Using precise mathematical rules, the SISTM recognizes the start and end of market trends. When it recognizes the beginning of an upward trend the SISTM generates a "buy" signal. Conversely, when it recognizes the beginning of a downward trend the SISTM generates a "sell" signal. By knowing when to buy, the SISTM enables investors to "buy low." By knowing when to sell, the SISTM enables investors to "sell high" as well as to side-step prolonged bear markets and preserve precious capital. As a result, investors can realize profits in both up and down markets and reduce unwanted portfolio drawdowns.

By generating buy and sell signals the SISTM gradually shifts each portfolio's asset allocations. This approach is often referred to as a "tactical asset allocation strategy." Others refer to the approach as a "market timing strategy." Regardless of what one calls it, the SISTM provides superior risk-adjusted returns compared to a buy-and-hold strategy.

Take a few examples of market tops and bottoms from recent history. U.S. real estate stocks peaked between late 2006 and early 2007. The U.S. stock market, international stocks and emerging market stocks peaked in late 2007. The US Dollar bottomed in April 2008 while intermediate Treasury Bonds bottomed in mid-2006 and again in mid-2007. Oil and other commodities peaked in mid-2008. As a trend-following mathematical model, our SISTM did not try to predict market tops or bottoms in each asset class, but within a short period of time it successfully recognized the change in market direction.

By participating in up-trending markets and acting defensively in down-trending markets, our SISTM provides savvy investors with a successful combination of both capital growth and capital preservation.