The MDE Group, a wealth management firm with $1.3 billion in assets under management, has developed an investment strategy that guarantees profits nearly double the market's increase and protects against losses, up to a point.

Risk 3.0 Portfolio Solutions is based on the assumption that the market will have relatively small returns in the future, with no wild swings of either profits or loss and it does not rely on market timing for investments. Until recently, Risk 3.0 Planned Return Strategy has been available only to individuals with at least $500,000 to invest, but it is now being opened up to registered investment advisors who can bring a group of clients to MDE with at least $300,000 to invest.

Under Risk 3.0, investors are assured a return on investment double the S&P up to a total of 12%. For example, if the market goes up 4%, the Risk 3.0 client will receive 8%. If the market goes up 8%, the investor receives 12%, which is the cap. If the market goes up 14%, the investor receives only 12% and sacrifices the additional 2% as part of the deal to get the other guarantees.

Risk 3.0 started a little more than a year ago and the investments that have matured so far have averaged 10.34%. The strategy is designed to deal with the new market realities of low growth and rock bottom interest rates.

Similar guarantees are given for losses, which Mitchell Eichen, founder and CEO of MDE Group says is even more important. If the S&P losses 6% or 8% the investor losses nothing, 0%. This applies up to a maximum loss protection of 12%.

If the market losses 14%, the investor looses only 2%, the difference between the real market loss and the 12%. When the market rebounds, it takes much less for the investor in this example to catch up than the person who has dug themselves into a 14% hole, Eichen says.

Planned Return Strategy pays for the downside protection and upside multiplier in two primary ways: by using the dividends generated by holding the underlying SPY ETF and by selling call options on the underlying SPY ETF such that the investor gives up the upside above the cap.

The hedge against loss is more important in the long run than the assurance of gains because, if the market goes down, you lose nothing or have to make up a lot less to conserve your capital and conserving capital is the key to accumulating wealth in the long term.

"This idea is starting to gain traction among RIAs," Eichen says. "I think this is going to be the major area of growth for us and I think, within a year, it will be an accepted strategy throughout the industry. We believe the market is going to have muted returns for five years or more. If you believe there will be huge gains like in the 1980s and '90s, then this strategy would not work."

Risk 3.0 invested its first funds a little more than a year ago and the numbers are coming out as predicted, Eichen said. Investments are made in batches and have to be held for one year. There is transparency for what is bought and Risk 3.0 enables diversity of investments. MDE charges 120 basis points for management fee and 30 basis points go to the broker. A refinement of this strategy, the Third Rail Strategy, provides some protections for market losses up to 40%.

Additional information on Risk 3.0 Planned Return Strategy or Third Rail Strategy can be found at or by emailing Eichen at [email protected].