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COVER_WOR32_092214_ds.indd 1 9/22/14 8:03 PM

When and how should I protect my portfolio gains?

Capital Wealth ManagementSean McGrath, President

Newport Beach, CA Leading Wealth Advisor

By Sean McGrath

1Dr. Jerry Minton, Chief Investment Officer, Alpha Investment Management Inc. 2Dana Lyons. “Stocks entering worst two quarter stretch of the presidential cycle,” The Exchange, Yahoo Finance, March 27, 2014, http://finance.yahoo.com/blogs/the-exchange/stocks-entering-worst-two-quarter-stretch-of-the-presidential-cycle-191830252.html.3“The Santa Claus Rally is Also Known as the December Effect in the Stock Markets,” Worst Stock Market Crashes, http://www.worststockmarketcrashes.com/predicting-crashes/the-santa-claus-rally-is-also-known-as-the-december-effect-in-the-stock-markets/.

No one can predict the financial future, and when we guess, we are usually wrong. But history, at least in the fi-nancial world, does have a habit of repeating itself. Indeed, analyses of market behavior have revealed pat-terns that not only occur again and again but at the same time of the year...nearly every year. Consider:

• Over 75 percent of a year’s bear market loss occurs from May to November.1

• The third quarter is typically the weakest performing quarter of the year.2• December has been known for its “Santa Claus rally.”3

Still, while we may take comfort in cycli-cal patterns and models, we know that no model is ever correct all the time. The markets get blindsided by unpredict-able events, like a tech bubble bursting or a Great Recession meltdown. Speak-ing of which, since 2007/2008, many investors’ mantra has been:

It’s not how much money you gain, but how much you protect.

With good reason. The great reces-sion tsunami that battered the global financial markets and threatened to blow everyone’s house down happened so fast, it was too late for many inves-tors to react. To continue the metaphor, another popular saying describes our approach to portfolio management:

The best time to work on your roof is when it’s sunny.

Some might argue that because of persistent weaknesses in the econ-omy—for example, unemployment seemingly glued to the 6 percent range—these are not sunny times. Others have a different misery index. Citing years of low interest rates, a fully-recovered market and IPOs on the rise, they see reasons to be optimistic and engage in some risk-taking not seen since the mid-2000s.

Whatever one’s view, now is the time to work on your portfolio, by providing what we call, “the three legs of the stool”:

LEG #1: Position a portion of the portfolio in investments that track an index. Since these investments corre-late to how the market performs during

sustained bull markets, this position participates in the up markets.

LEG #2: Position another portion of the portfolio in alternative assets (i.e. real estate). This portion of the portfo-lio is correlated with other economic indicators that may focus on apprecia-tion and income.

LEG #3: For the final portfolio position, consider alternative investment strate-gies. These strategies are designed to proactively shift exposure to the mar-ket’s ebbs and flows, helping to protect the investor in down markets and participate in up markets.

Of course, circumstances and the pat-terns that recur will affect not only the level of commitment to each investment style in the portfolio, but will prompt shifts within each one. That said, in our view, perhaps the greatest enemy of a portfolio is complacency. So, not only should portfolios be reviewed periodically and be worked on when it is “sunny,” they should be checked for “leaks” throughout the year.

Capital Wealth_WOR32.indd 136 9/17/14 11:13 AM

When and how should I protect my portfolio gains?

Capital Wealth ManagementSean McGrath, President

Newport Beach, CA Leading Wealth Advisor

By Sean McGrath


No one can predict the financial future, and when we guess, we are usually wrong. But history, at least in the fi-nancial world, does have a habit of repeating itself. Indeed, analyses of market behavior have revealed pat-terns that not only occur again and again but at the same time of the year...nearly every year. Consider:

• Over 75 percent of a year’s bear market loss occurs from May to November.1

• The third quarter is typically the weakest performing quarter of the year.2• December has been known for its “Santa Claus rally.”3

Still, while we may take comfort in cycli-cal patterns and models, we know that no model is ever correct all the time. The markets get blindsided by unpredict-able events, like a tech bubble bursting or a Great Recession meltdown. Speak-ing of which, since 2007/2008, many investors’ mantra has been:

It’s not how much money you gain, but how much you protect.

With good reason. The great reces-sion tsunami that battered the global financial markets and threatened to blow everyone’s house down happened so fast, it was too late for many inves-tors to react. To continue the metaphor, another popular saying describes our approach to portfolio management:

The best time to work on your roof is when it’s sunny.

Some might argue that because of persistent weaknesses in the econ-omy—for example, unemployment seemingly glued to the 6 percent range—these are not sunny times. Others have a different misery index. Citing years of low interest rates, a fully-recovered market and IPOs on the rise, they see reasons to be optimistic and engage in some risk-taking not seen since the mid-2000s.

Whatever one’s view, now is the time to work on your portfolio, by providing what we call, “the three legs of the stool”:

LEG #1: Position a portion of the portfolio in investments that track an index. Since these investments corre-late to how the market performs during

sustained bull markets, this position participates in the up markets.

LEG #2: Position another portion of the portfolio in alternative assets (i.e. real estate). This portion of the portfo-lio is correlated with other economic indicators that may focus on apprecia-tion and income.

LEG #3: For the final portfolio position, consider alternative investment strate-gies. These strategies are designed to proactively shift exposure to the mar-ket’s ebbs and flows, helping to protect the investor in down markets and participate in up markets.

Of course, circumstances and the pat-terns that recur will affect not only the level of commitment to each investment style in the portfolio, but will prompt shifts within each one. That said, in our view, perhaps the greatest enemy of a portfolio is complacency. So, not only should portfolios be reviewed periodically and be worked on when it is “sunny,” they should be checked for “leaks” throughout the year.


137

How to reach Sean McGrath

Each investor has a specific set of goals and expectations that are unique to his or her individual situation. To learn how we can meet and exceed your expectations, please contact me at 800.435.3550 or [email protected].

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W O R T H . C O M O C T O B E R - N O V E M B E R 2 0 1 4

Financial Services Experience12 years

Minimum Fee for Initial MeetingNone required

Minimum Asset Requirement$250,000 (in investable assets, investment services)

Assets Under ManagementAvailable upon request

Compensation Method Fixed and asset-based fees

Primary Custodian for Investor AssetsAccounts introduced to JP Morgan Clearing Corp. by Western International Securities

Professional Services ProvidedPlanning, investment advisory and money management services; insurance advice and products

Website Emailwww.capital-wm.com [email protected]

Capital Wealth Management 20341 Irvine Avenue, Suite D5, Newport Beach, CA 92660 800.435.3550


MY HOBBIES ARE…

Spending quality time with my family, surfing and swimming

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Capital Wealth Management 20341 Irvine Avenue, Suite D5, Newport Beach, CA 92660 800.435.3550 Capital Wealth Management 20341 Irvine Avenue, Suite D5, Newport Beach, CA 92660 800.435.3550 Capital Wealth Management 20341 Irvine Avenue, Suite D5, Newport Beach, CA 92660 800.435.3550

Website EmailWebsite Email

About Sean McGrathSean McGrath established Capital Wealth Management in 2012 in order to provide independent and comprehensive financial advisory services to families and businesses. Western International Securities Inc. serves as broker/dealer, and J.P. Morgan Clearing Corporation serves as custodian of assets. Capital Wealth Management has been named a Five Star Professional Wealth Manager for the past two years, recognized for the firm’s commitment to clients and its extensive ability to help navigate any type of market condition. Mr. McGrath received his bachelor’s degree from the University of Texas at Austin, where he was a 10-time All American swimmer. He resides in Newport Beach with his wife and three young children. Mr. McGrath is actively involved with local charities and is a volunteer baseball coach for the NHBA.

I NEVER LEAVE HOME WITHOUT…

Kissing my wife and kids

“The best time to work on your financial roof is when it’s sunny.”— Sean McGrath

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MY GOALS FOR THE YEAR INCLUDE.. .

Continuing to streamline and improve tactical investment

strategies for my clients


the evolution of financial intelligence

R E P R I N T E D F R O M

®

Capital Wealth Management is featured in Worth® 2014 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of Sandow Media LLC. See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.

Sean McGrath President

Capital Wealth Management20341 Irvine Avenue, Suite D5

Newport Beach, CA 92660Tel. 800.435.3550

[email protected]

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