Top Down Approach
Top Down Approach
Richman Capital Management believes the most effective method to build wealth is by actively managing individual stocks. Our 5 step guide to investing is outlined below:
(1) Invest in the Same Direction the Market is Heading
Investing starts with understanding the trend of the market: Bullish or Bearish. It's often better to invest with the direction of the market, rather than against it because the overall market can greatly impact the movement of individual stocks. We pay close attention to what the institutional players buy and sell as they have large influence on market movement.
(2) Identifying the Strengths & Weaknesses of the Market
Now that we have determined which direction the market is headed, we start to drill down in the top trending portions of the market by analyzing the stock sectors and industries. This allows us to remove underperforming industry groups from consideration and focus on sectors with the greater breakout potential.
(3) Focus on Stocks with Higher Probability to Outperform
Once we examine which sectors of the market are outperforming the benchmark index, the process of selection begins by reviewing stocks that are consistent with those trends. We also diversify the portfolio to avoid sector and industry over concentration.
(4) Zero In on Stock Candidates using Essential Indicators
When we have identified the stocks we feel will likely outperform, it is time to conduct a deeper analysis to narrow our selection. This is done by utilizing fundamental analysis based on 20 factors along with technical analysis including relative strength, institutional action, bollinger bands and overbought/oversold technical indicators.
(5) Buy Low Sell High
Although we are not market timers or swing traders, it is important to pay attention to how the markets are performing and take advantage of the long term trends. We will never buy at the very bottom of the market or sell at the very top of the market, but provide a reasonable buy/sell strategy. This allows us to lower your portfolio risk when the markets turn downward.
Investments are subject to risk, including the loss of principal. Because investment returns and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results.