Hortz: Do you see Dynamic Investment Theory replacing Modern Portfolio Theory portfolios in the future?
Hevner: It has the potential to replace MPT in its entirety, but most likely DIT will serve as either a supplemental or an alternative approach. With the introduction of DIT and DIs, investors now have choices for a portfolio design approach – these being the use of MPT, DIT or a combination of the two. Over time, the investing public will determine which approach becomes dominant. I believe that when individuals learn about the advantages of Dynamic Investments, the demand for them will grow. At that point financial organizations that meet this demand will thrive, those that don’t may struggle.
Hortz: Besides enlightening and empowering your retail investor members, how are you trying to engage and what are offering to the incumbent, mainstream financial services industry?
Hevner: The financial services industry should not view DIT and DIs as a threat but rather as a gateway to a vast new world of opportunities and profits. Because DIs meet the goals of the investing public, they will entice millions of potential clients to enter the market. These are people who are now not active investors because of the uncertainty and risk they see as being inherent in the markets and the ineffective use of MPT-based portfolios. The high returns and risk reduction elements of DIs mitigate these fears. For this reason alone the industry should embrace DIT. But there are other reasons as well.
New, powerful DIs are easy to create, bypassing the time, cost and effort of developing new ETFs or mutual funds. They are formed by simply combining existing ETFs, mutual funds, or other liquid investment vehicles in the DI structure. As a result, investment product developers and advisors will be able to expand their product lines virtually overnight and offer dynamic portfolios that perform far better than the MPT portfolios used today.
To enable financial organizations to take full advantage of the coming Dynamic Investment Theory revolution, the NAOI offers DI education seminars, design classes, and customized consulting services. We also welcome R&D partnerships aimed at developing new methods and applications within the DIT framework. Interested parties can contact me at [email protected].
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