The FSA Safety Net® Part 1

How does FSA use the FSA Safety Net® to protect client portfolios from sustained downward trends? Ron Rough, FSA’s Director of Portfolio Management, explains our process in part one of this two-part series.

FSA SAFETY NET® PART 1 TRANSCRIPT

Hello! This is Ron Rough with a Technical Tuesday video. Today we’re going to talk about the  FSA Safety Net®.

wHAT IS THE FSA SAFETY NET®?

The  FSA Safety Net® is an exit point that we assign to each security in a client portfolio. If there are eight or nine different funds in your portfolio, we’ll put an exit point under each one.

WHERE IS THE FSA SAFETY NET ® PLACED?

The amount of the drop that we allow for each fund varies according to the risk of the fund. A stock fund may have an exit point ten to twelve percent below the price, whereas a bond fund might have an exit point only three to five percent below to the purchase price.

Let’s take a look at an example: let’s say we bought a stock fund and we paid ten dollars for it. The exit price, the safety, net could be at nine dollars. That’s about a ten percent drop. If the fund then it goes up to twelve dollars, we raise that safety net up to eleven dollars.

Now let’s suppose that the price of the fund falls to nine dollars. We keep the safety net at eleven. And so when the price goes through eleven, we sell the fund somewhere right below eleven, depending on what the fund did that day.

EXAMPLES OF THE FSA SAFETY NET ®

Now if we look at some individual charts, we assign a safety net to each fund in your portfolio. So what we’re trying to do is allow these particular drops not to trip our safety nets. When we want the safety net to be tripped is on these bigger declines here and back here.

This high-yield bond fund here has a completely different look than the equity fund. Again, we’re trying to protect on some of these sharper declines. Whereas some of these smaller declines, we don’t want the safety net to be triggered.

So if you have any questions about the content in this video, please call or email us. And until our next update, thank you for watching!

 

FSA’s current written Disclosure Brochure and Privacy Notice discussing our current advisory services and fees is available at www.FSAinvest.com/disclosures or by calling 301-949-7300.

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