Just over a year ago the world seemed as though it was about to end. Fear ruled the day. The Dow Jones Industrial Average bottomed out at almost 54% below its peak from October 2007.
I highly doubt that you could have found anyone at that time who believed that one year later the Dow would be around 10,500. At the time you would have been looked upon as a fool for saying so!
During that time and the subsequent market rebound, active managers were able to position their portfolios to take advantage of the changing market. Flexibility is a significant advantage to the active money manager.
During turbulent times they are able to take advantage of market dislocations. This is not to say that they always get it right, and most don’t, but that does not mean that active management does not work, but rather that one should be selective in choosing an active money manager.
Many passive managers believe there is no way to obtain an advantage over the “rational market” during those situations. My experience has shown that until humans become devoid of emotions, the market will always get pushed to extremes, and it is these moments that offer opportunity for the savvy investor!
Wealth Management is a provider of managed portfolios for
individuals and institutions. Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy. All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice. This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security. Past performance is
not a guarantee of future results.
Finding a financial advisor can be daunting. This is because the title “financial advisor” is not regulated, and advisors range from annuity sales people, to insurance agents, to registered money managers.
The video below explains what to look for in a financial advisor and how to quickly identify a financial advisor who is competent and offers you the best service for your money.
David Young, President of Paragon Wealth Management, understands how difficult it can be to find a money manager. He started managing his own money in 1986 after he sold his 12 franchise businesses. He wanted to invest the money from the sale, but wasn’t impressed with the brokerage firms available at the time.
Since then, Dave has done research to find ways to get the best returns. Through trial and error, he has been able to build quantitative models to base his investment decisions.
There is no guarantee what the future will bring, but these are Paragon’s flagship portfolio’s returns from its inception on January 1, 1998 through May 2010.
Paragon’s Top Flight Portfolio generated a total return of351.10 percent verses39.22 percent for the S&P 500. Its compound annual return is 12.99 percent, versus 2.72 percent for the S&P 500 (visit Paragon’s website to see Top Flight Portfolio’s updated numbers, complete track record and full disclosures).
An investor’s actual returns may vary due to timing of withdrawls, contributions and other factors. Past performance is no guarantee of future results. Before investing, contact Paragon to discuss your investment objectives, risk tolerance and fees. Investments in securities involve the risk of loss. The S&P Index is a market-value weighted index comprised of 500 stocks selected for market size, liquidity, and industry group representation. It is not possible to directly invest in this index.
Most investors would be better off with the help of a financial advisor.
Unless you have the time desire, expertise and resources to manage your own portfolio, I recommend that you hire a professional full-time money manager.
Unfortunately, finding the right advisor is much more difficult than most people realize.
Part of the problem is that titles for financial sales reps are completely unregulated. This means that brokers, annuity salesmen and insurance agents are all free to call themselves advisors, financial consultants, financial planners or whatever looks good on their business cards.
To make sure you don’t get stuck with a salesperson touting a deceptive title, make sure you get good answers to these questions:
FIDUCIARY- Is the advisor fiduciary? Fiduciary advisors have a legal obligation to put your interests ahead of their own. Sales reps peddling insurance, mutual funds or other financial products are most likely not fiduciaries. Only about 15 percent of all financial advisors actually meet the fiduciary requirement.
EXPERIENCE- How much experience does the advisor have? Markets are difficult to navigate and constantly change. Ideally, your advisor has experience investing in both good markets and bad markets. In the final analysis, you are paying an advisor for his or her experience.
TRACK RECORD- What is the advisor’s track record? Legitimate advisors will be able to show you a clear report of what they’ve done for their clients over the years. Any potential advisor who refuses to show you a track record should be immediately crossed off your list.
CONFLICT OF INTEREST- Is there a conflict of interest? Generally, conflicts of interest are eliminated by avoiding salespeople who receive commissions. By working only with advisors who are paid through management fees and not commissions, you can make sure their interests are aligned with yours.
SURRENDER CHARGE- Is there a surrender charge? You should be free to move your money out of an investment if you are dissatisfied. This means you should never own a product with a surrender charge.
Once again, we are at the beginning of a new year. Each year seems to pass by quicker than the previous. In 2007, the markets started strong with a lot of optimism. The optimism disappeared when the market dropped in March, because the Dow lost about 700 points and found itself just above Dow 12,000.
Just as everyone was beginning to question their optimism, the market rallied off of the March lows, and by April reached Dow 13,000 for the first time. By mid-January the Dow was knocking on Dow 14,000. Everyone was euphoric, and according to our sentiment models, most investors thought the market would continue its upward climb.
As usual, once everyone is in agreement about where the market is going, it goes in the opposite direction. The sub prime debt problems became a serious issue in July and August, and the market sold off once again. This time the Dow fell again, but hit higher lows than the March sell off. The Dow sunk to 12,7000.
This is when things became interesting. The media was in full swing with their pitch that the market is “always” horrible in September and October. Clients called us and wanted to be taken out of the market because of the recent sell off and all of the doom and gloom in the press.
Not surprisingly, the market performed the way it usually does in order to make the majority of investors wrong. In what are traditionally the worst two months of the year, September and October, the market instead rallied. During the historically worst months to invest, the market put together its strongest rally of the year peaking back at just under Dow 14,200.
The credit fears and worries about the strength of the economy pushing the market down came back again, and the Dow finished the year at 13,264.
The broadly watched, large cap DJIA gained 8.7% for the year. The S&P 500, which is also more representative of the large cap U.S. market, gained 5.5%. The Russell 2000 which represents 2000 small cap stocks lost – 1.6%. Finally, the Value Line Geometric Index, which is the broadest based index and represents 1,626 stocks, declined -3.8%. Overall, depending on where you were invested, it was a marginal year for many investors.
Paragon Top Flight Portfolio
Our Top Flight Portfolio had an exceptional 2007 returning 16.98% versus 5.5% for its benchmark, the S&P 500 (See track recordfor full disclosures).
How did Top Flight generate such good returns in a year when the major market indexes were just slightly positive or and even negative?
There were three reasons why we were able to triple the return of the S&P 500 benchmark this year.
1- The change from mutual funds to Exchange Traded Funds (ETF’s) boosted our returns. Because mutual funds are generally broader based, in the past they made it more difficult to “dial in” exactly where our models are pointing, and there is no slippage. Also, the ETF’s allow us to follow our allocation models with exactness because unlike mutual funds, we don’t face early withdrawal fees or penalties.
2- Our Allocation Models signaled opportune times for us to reduce and increase exposure during 2007. Twice, at opportune times, we reduced exposure from 100% invested to 56% invested. These allocation changes benefited our returns.
3- Our Focus Models pointed us towards the areas of the market that showed the most strength. We experienced additional gains by following our Focus Models recommendations and investing in natural resources, emerging markets, Brazil, Canada, Australia, and Europe. Our limited exposure to the U.S. market was positive for Top Flight.
Top Flight portfolio recently completed 10 years of performance from December 31, 1997 through December 31, 2007. During this period, Top Flight generated a total return, net of all fees, of 417% versus 77.4% for the S&P 500. Its compound annual return is 18.03% versus 5.95% for the S&P 500 (see track record for full disclosures).
In the investment industry, 10 years is significant. Almost anyone can get lucky and have an exceptional year. If you see three years of good performance, investment advisors will start to notice. A five-year track record is even better. To generate 10 years of exceptional performance is even more meaningful.
I have sat on several industry panels where other “experts” have argued that active management doesn’t work. I believe that Top Flight’s 10-year track record indicates otherwise.
Managed Income Portfolio
Managed Income returned 2.24% for the year (seetrack record for full disclosures). It performed well from a relative standpoint, but not so well from an absolute standpoint. So what does that mean… it sounds like investment mumbo jumbo?
From an absolute standpoint, 2.24% is nothing to get excited about. We could have put our money in a bank CD and done much better if we had known the return in advance. Unfortunately, no one announced last January how the year would unfold.
From a relative standpoint, Managed Income performed exceptionally well. The underlying asset classes that make up Managed Income were a minefield last year. Managed Income invests in real estate, convertibles, preferred stock, high yield bonds, treasury bonds, bank loan funds, dividend income funds, etc. It invests in all of the more conservative asset classes that generate income. Most of those asset classes struggled last year and anything associated with real estate ended the year down about 15 percent.
Relative to previously mentioned investment groups that Managed Income is forced to stay within; we will take 2.24% for last year and be pleased with it. The fact that Managed Income was able to even generate positive returns last year was noteworthy.
Also, keep in mind that Managed Income’s primary objective is to avoid losses. Its secondary objective is to generate the highest returns possible within the investment constraints of avoiding losses. In 2007 it met both of these objectives.
Longer term, since Managed Income’s inception on October 1, 2001, the portfolio has generated a total return of 76.33% doubling the 36.95% earned by its benchmark, the Lehman Bond Index. Its compound annual return is 9.63% versus 5.23% for the Lehman Bond Index.
Part of the Paragon Experience is visiting us in Provo, Utah. Our office is different than the typical money manager's or financial planner's. We have a nine and a half foot grizzly bear, a bobcat, and pictures of the outdoors on every wall. Dave is an avid hunter, and his office makes him feel at home. When you come to visit, it will be an experience you won't forget!
Written by: Shannon Golladay, public relations Paragon’s Top Flight Portfolio’s total return was five times higher than the index
Provo, Utah- Utah wealth management company, Paragon Wealth Management, had more than one thing to celebrate on New Year’s Day when they calculated Paragon’s Top Flight Portfolio’s performance numbers on December 31.
Paragon’s Top Flight Portfolio generated a total return of 417.34% versus 77.42% for the S&P 500 from its inception on December 31, 1997 through December 31, 2007. Its compound annual return is 18.03%, versus 5.95% for the S&P 500. (Visit www.paragonwealth.com to see complete track record and full disclosure.)
Dave Young, President of Paragon Wealth Management, and Nathan White CFA, portfolio manager, actively manage Paragon’s Top Flight Portfolio using two distinct sets of quantitative models.
One set measures market sector and style strength over various time frames, which determines where Top Flight’s funds are allocated. This is constantly adjusted depending on where market strength is coming from. The second set of models measures market risk. The portfolio’s long exposure is constantly adjusted depending on how much risk is perceived to be in the market.
“Many growth oriented portfolios simply take a more passive approach rather than actively looking for areas of the market that offer the most potential,” said White. “The success of Paragon’s Top Flight Portfolio is partially due to actively managing the downside risks.”
Paragon’s Top Flight Portfolio was created in late 1997 as the culmination of the best systems and models Paragon had used up to that point. Its investment universe includes the U.S. and International stock markets. This portfolio is suitable for investors able to tolerate exposure to the volatility of the broader stock market. It is actively managed, and will primarily move in and out of selected exchange traded funds (ETFs) based on Paragon’s quantitative models, which can change frequently depending on market conditions.
“We’ve been told that active management doesn’t work,” said Young. “We believe Top Flight’s last 10 years of performance indicates otherwise.”
Paragon’s principal objective of the Top Flight Portfolio is to generate superior absolute returns in rising markets while hedging against downside volatility in falling markets. While there is no guarantee of this goal being achieved, Paragon actively manages towards this objective.
About Paragon Wealth Management
Paragon Wealth Management is a money management firm located in Provo, Utah. With over 20 years of experience as financial advisors, they are dedicated to creating success for their clients. They manage retirement accounts such as IRA rollovers, 401(k) rollovers, pensions and trusts. Paragon has a fiduciary responsibility. Visit www.paragonwealth.com for more information.
An investor’s actual returns may vary due to timing of withdrawls, contributions and other factors. Past performance is no guarantee of future results. Before investing, contact Paragon to discuss your investment objectives, risk tolerance and fees. Investments in securities involve the risk of loss. The S & P index is a market-value weighted index comprised of 500 stocks for market size, liquidity, and industry group representation. It is not possible to directly invest in this index.
Written by: Jacob Hancock, Deseret News staff writer
PROVO — Dave Young hasn’t pulled a coin from thin air or yanked a rabbit out of his hat since quitting his full-stage magic show decades ago. Today, 160 wealthy clients trust Young to produce higher yields — work his magic, if you will — on their stock-market nest eggs.
Young, an ex-magician who founded Paragon Wealth Management in 1992, has managed to boost his company’s two main stock-market portfolios to chart-topping heights. His Top Flight Portfolio has churned out a return of 457 percent during its nine-year history, dwarfing the nation’s much-revered Standard & Poor’s 500, which accumulated a scrawny 86 percent return in the same time period.
Paragon’s Top Flight portfolio is racking up a 19 percent compound yearly return, while the S&P 500 has landed around the 7 percent annual mark. Even Young’s most conservative, low-risk portfolio, Managed Income, is beating its benchmark, the Lehman Bond Index by nearly double in its total compounded annual returns since its inception in 2001.
For the past 10 years, the former magician’s calculations have kept him in the nation’s top 1 percent of investment managers. The 51-year-old Provo resident guards his secrets like a clam guards a pearl, but he nearly comes undone in his struggle to explain his recipe for stock-market success.
“It’s like this,” he says emphatically, holding one arm diagonally. “You buy (stocks) here; get rid of it when it starts to curve here. Keep your eye on this area, though,” he said, pointing somewhere near his wrist. “It’ll get you if you don’t.”
When Young sits down to actually forecast the future of fickle stocks fastened to a feral market, he uses slightly more sophisticated models than his appendages. But “basically,” he said with a sigh of finality, “watch your curves; they’re your indicators.”
His oldest daughter, Shannon Golladay, 27, said his financial advice can be boiled down to the spend-less-than-you-earn tenet, but she is quick to mention that her dad is worth more than the cold financial figures he cultivates daily.
“He’s a real humble guy who’s done a lot of amazing things,” she said. “He won’t tell you this, but he’s raised hundreds of thousands for scholarships, given money to friends and family, and this year the company is giving money to help a (local) boy get brain surgery.”
Golladay, who works in her dad’s plush office, also said her father supports an orphanage in Uganda, Africa.
When later approached about the Uganda project, Young squirmed in embarrassment. “The thing is, money just goes so far there,” he said. “For about the price of a house here, you can make a huge difference there.”
Before conquering the world of Wall Street and years before supporting charity endeavors, the then-27-year-old magician struggled with lining up his priorities.
The moment his child was born, working with his female assistants on a stage of smoke and mirrors slid quickly down his list of priorities. When she turned 1, his magic tours disappeared.
Once, after a two-month road trip, Young slipped home one evening in 1981 just in time for his year-old daughter’s first birthday party. Instead of his daughter welcoming him with a hug, she stared coldly at “the stranger.”
“My daughter didn’t even know who I was when I came back,” Young said, looking at his office floor with a faint squint.
He shook his head. “She wouldn’t even come to me.”
He quit touring full time immediately and went to work building auto-painting and interior-design franchises in a variety of states. One of his businesses in Reno, Nev., ran so inefficiently, he said, that he could “hear a great big cash-sucking sound every time I thought about it.”
Eventually, he turned the money pit into a cash cow, sold it, played golf and hung out for a full year. “I made a decent chunk of money selling the centers,” he said.
He turned to the stock market but wasn’t impressed with portfolio managers who passively “rode out the lows” between market upswings. He joined the market anyway but managed his own portfolio manually, calculating stock averages on his 1980s computer.
A few of his younger friends hopped aboard, but it was their parents who made up the majority of his small, grassroots investment group. Friday morning, Oct. 16, 1987, Young and his clique of investors were fully invested. By that afternoon, Young completely cashed out of every stock of his investors because of a tiny but ominous-looking prospect he discovered in his finely tuned calculations.
He forgot about it and took off for a brisk October hunt.
His suspected prophecy of doom turned reality 60 hours later on Oct. 19 when the stock plunged to such a devastating low that the day was dubbed Black Monday.
“I got back and saw that my answering machine was just completely loaded with frantic messages,” he said. “Oh, they were upset, saying things like, ‘That’s my whole retirement!’ and, ‘What am I going to do?”‘
Young’s cash-out decision spared their portfolios from a 22 percent nose dive and boosted his image to attract more serious and affluent clients.
Today, with a $200,000 minimum investment rule and an average account size of $600,000 for his 160 clients, he delicately baby-sits about $100 million regularly and advises outside entities on an additional $200 million.
He tends the money from a sort of master control. He’ll casually tell you it’s just a desk. He doesn’t see the eccentricity of surrounding himself with a system of three wide-screen monitors iridescently gleaming with real-time moving graphs of the national and international markets, no doubt triggering sirens at the slightest downturn.
“It’s like a game of chess,” he said. “OK, like a challenging game of chess,” he corrected.
He doesn’t mind a challenge; he traveled halfway around the world to find new ones.
“Now, hunting a leopard, that’s tough,” said Young, an avid big-game hunter who has hunted leopards in Zimbabwe. “They’re like a mountain lion on steroids.” Shooting the leopard, he said, “was one trick I won’t forget.”
And that’s saying something for a fellow who’s been pulling off tricks since he, as a 12-year-old, received his first magic kit in the mail from a Trix cereal promotion. Since then, he’s yanked rabbits out of his hat, launched and sold profitable businesses, defeated the stock market and raised five children with his wife. And, he says, “it just keeps getting better.”
Clients who have been with us for years know we aren’t big fans of market forecasts, whether they are made by us or anyone else. Let me tell you why I believe so strongly.
There’s no shortage of self-proclaimed market prophets. You can find them in the investment magazines, newspapers or CNBC. Although they can be entertaining, they provide no real investment value. They do not help anyone make money. In fact, investors who follow them are more likely to lose money than to gain it.
The way the forecasting game works is that the market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. By sheer luck maybe half of these predictions are proven right-meaning that at least half of them are wrong. On the occasions when the forecast turns out to be correct, the forecaster plays it up. Those many forecasts that don’t pan out (and those many investors who are financially hurt by them) are never spoken of again. In truth, you’re much more likely to get an accurate prediction of the future by listening to the weather forecasters. At least they inflict less damage when they’re wrong.
Ned Davis Research and InvestTech recently collaborated to analyze the forecasts of some of the most highly paid and highly regarded market forecasters in the financial industry. This is a small sampling of the findings:
* Out of the 22 high profile panelists on Louis Rukeyser’s Wall Street program for 2001, none predicted the market to close as low as it did that year.
* Out of the 22 high profile panelists on the same program for 2002, none expected the low close at the end of that year either.
* In 2000, at the prestigious Barron’s Roundtable, one of the 11 Wall Street strategists had a forecast that was close to being accurate.
* At the 2001 Barron’s Roundtable, two of the 12 forecasters were close to the actual market year end close.
* In 2002, two of the 11 Barron’s Roundtable participants were close.
* In the 2000 issue of Business Week, 52 of the 55 experts (95%) who forecast the year-end level of the S&P 500 were wrong.
* At the beginning of 2002, Business Week again held their survey of “the smartest players on Wall Street.” The consensus forecast of the 54 participants for the S&P 500 was 1292. The actual close was 32% lower at 880. Not a single esteemed participant came close to the actual close.
These findings may seem shocking to someone encountering them for the first time, but they are far from atypical. This is just a small snapshot of how bad the market forecasting business really is. Yet despite mountains of data that show how ineffective the celebrity market forecasters are, they continue to make their predictions and many unfortunate people continue to base their financial decisions on shoddy, unproven advice.
Clients don’t need to go to Wall Street to receive excellent returns on their investments
Written by: Shannon Golladay, Public Relations
PROVO, UT– Utah money manager, David Young, has outperformed the S&P 500 with his Top Flight Portfolio for almost 10 years and been kept a secret for over 20.
Young, President of Paragon Wealth Management, manages the Top Flight Portfolio. It has generated a total return of 457% verses 86% for the S&P 500 from its inception on January 1, 1998 through October 31, 2007. Its compound annual return is 19.3%, versus 6.6% for the S&P 500. (Click here to see Paragon Top Flight Portfolio for complete track record and full disclosure.)
“My goal is to make my clients’ lives easier by helping them make good investment decisions,” said Young. “Ultimately, I would like to help them make work optional.”
Young started investing his own money in 1986 after he sold his 12 franchise businesses. He went to several investment groups to invest the funds from the sale, but he couldn’t find anyone he wanted to use.
“I tried several brokerage firms in the mid-80s, the traditional option at the time, and they did not meet my needs,” said Young. “I knew there had to be a better option.”
In 1986 Young formed “The Center for Financial Excellence” where he built basic quantitative models to determine when to be in or out of the equity and bond markets, and he used no-load mutual funds as his investment vehicle. He began to handle his own accounts and soon began managing his friends’ and family’s money. When he avoided the 1987 stock market crash, his methods sparked a lot of interest.
In 1992, Young formed Paragon Capital Management, which is now called Paragon Wealth Management, and registered with the SEC. He added staff and began attracting clients with larger amounts of money. He built more sophisticated and complex quantitative models to determine investment strategies regarding styles, sectors, and markets. Portfolio allocations were based around short-term, intermediate, and long-term models.
Paragon Wealth Management is a money management firm located in Provo, Utah. With over 20 years of experience, they are dedicated to creating success for their clients. It is estimated that only 10% of investments advisors have fiduciary responsibility, and Paragon falls in this elite group. Paragon receives no commissions and does not sell any financial products. They simply charge a management fee. Unlike traditional advisory relationships, Paragon clients are free to withdraw their money at any time without paying any surrender charges. For more information contact Shannon Golladay at 801-375-2500.