Our approach to risk management is so simple that it’s almost radical. We don’t study company balance sheets. We don’t interview executives. We don’t go with our gut. Instead, we chart each investment. As we closely monitor supply and demand, we identify changes to the trend, and plan entry and exit points.

Research in Motion (RIMM), for example, is a stock that gave its first sell signal in March 2011 at $64/share. At that time, many analysts urged their clients to add to their positions, or to at least “hold on for the long term.” Those investors have watched their shares chart a jagged course down to below $10/share*, resulting in an 85% decline in value.

Every stock, every fund, and every asset class is subject to the laws of supply and demand. We chart this supply and demand on a daily basis, and we continuously watch the chart for a change in trend. As demonstrated by RIMM, the relative strength of the stock changed direction, the trendline was broken, and it was time to exit.

*as of June 5, 2012


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