Swan Consulting, Inc. Warns: Asset Allocation and Diversification Miss the Mark

Durango, CO, February 02, 2009 --(PR.com)-- Investors have been operating under a false sense of security. 2008 will go down as the year that exposed the weakness of diversification or asset allocation.

For the 12th consecutive year, the results have shown that the downside protection is not only a conservative approach to protecting capital, but also a mechanism to generate significant returns. The Defined Risk Strategy (“the Strategy”) established in 1997 proves the long-term value of downside protection. The Strategy uses dynamic hedging with long and short-term options to protect investor capital. The Strategy allows an investor to define risk upon initiation of the investment. Since inception through December 2008, the Strategy has averaged better than 11% returns and outperformed the S&P 500 by 219%.

Randy Swan, founder and President, is pleased with the results; he is more excited about the future. Admittedly, Mr. Swan does not like to speculate about the future of the markets, but he believes they are entering an extended period of “choppy movements.” Swan is confident the Strategy has yet to show its maximum potential. He claims, “The Strategy is better suited for markets that are flat and or moving back and forth rather than unidirectional for an extended amount of consecutive years. The dramatic bull and bear markets that dominated the landscape for the last 30 years posed the biggest challenge for the Strategy, yet it has done exceptionally well.” Swan’s article, “There is still Room Left in the Lifeboat,” offers details to how the Strategy presents investors the best potential to succeed in the future.

In 1997 Swan decided that asset allocation did not provide enough protection and then started a company to prove it. Swan Consulting Inc was started on the following premise:

“It is important to note that the great claim of asset allocation relates to the risk reduction achieved by diversifying over several broad asset classes (i.e. stocks, bonds, cash and real estate) without a similar reduction in return. However, the risk reduction is strictly theoretical (typically based upon relationships that existed over a particular period with no guarantee that these same relationships will continue in the future). This is the crux of where asset allocation or modern portfolio theory breaks down. Risk is not defined; instead it is merely expressed in historical standards.” - Randy Swan 1997

Swan Consulting, Inc provides index-based strategies that participate in the upward price movement while reducing most of the downside risk. The goal is to provide returns that exceed the stock market on risk adjusted and absolute basis.

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