That means keeping customers happy starts with setting their expectations correctly on Day One, making certain your analysis covers a large enough time spectrum to account for all market anomalies.
In our case, we have tested our systems through the past 40 years, seeing the performance through extreme periods like the hyperinflation of the 1970s, the dramatic declines in October 1987, the dot-com bubble, etc. The goal was to identify the times that the model did not perform as expected, and be able to give potential customers an expectation of their future performance. Testing through 40 years was not easy, but a good strategy uses enough data to identify those times the system performs well and when it doesn’t. That way you can provide full disclosure to your clients and guarantee their long-term satisfaction with the plan.
A Probabilities Game
Statistics do not guarantee success, but the more analysis performed, the more likely the future outcome will be as expected. Historical precedent puts the odds in your favor. And that’s what it is all about—using empirical data to increase your probabilities of success.
Randall Mauro is the president of Resnn Investments LLC, an IAR money management firm.