Plan to Invest Wins Wagner Award in International Competition

Investors Can Have Less Risk, More Reward, Award-Winning Paper Shows

Greenwood Village, CO, August 18, 2012 --( Plan To Invest Capital Management, Inc. today announced that a white paper written by Chief Investment Officer Michael K. Hartmann, MSAcc, CPA won a second place Wagner Award from the National Association of Active Investment Managers (NAAIM) in an international competition.

Hartmann’s paper, “Short Term Alpha as a Predictor of Future Mutual Fund Performance,” disproves the long-held belief that higher risk yields higher returns. This cornerstone of modern portfolio theory is widely accepted by most investment professionals, but not by active investment managers like Hartmann.

His paper also disproves the concept of "efficient markets," in which a static portfolio, based on an “efficient frontier allocation” with the lowest possible costs, provides the optimal approach to investing.

“Evidence is mounting that the ‘efficient frontier’ isn’t so efficient and that lower risk can yield greater long-term rewards,” Hartmann said. “Given the volatility of the market in recent years, this should be a logical conclusion, but it’s difficult to change thinking that has prevailed for decades.”

Typically, financial advisors use a “buy and hold” strategy, investing in a diversified mix of investments for clients based on a specific allocation of assets. Investments are typically held long-term with few changes to the portfolio, except for periodic rebalancing.

Hartmann found that investing in mutual funds based on short-term alpha can be significantly more profitable. Alpha is the amount by which a mutual fund’s return exceeds the return of its benchmark index.

Based on his research, investing in the top three funds based on alpha values and periodically exchanging funds almost always beat the benchmark rate of return that would be obtained by holding the same assets throughout the investment period.

To determine whether funds with the highest alpha short-term would outperform their benchmark, regardless of the type of fund and regardless of market conditions, Hartmann studied funds in nine different investment categories over the period Dec. 3, 1999 through Dec. 31, 2011.

“Out of the 270 possible combinations, 238 outperformed their relative benchmark,” Hartmann said. “Given that result, there’s a 99% confidence level that funds selected based on the proposed alpha methodology will outperform their benchmark.”

The average annual rate of return for funds selected based on short-term alpha was 6.78% -- nearly twice the benchmark average return of 3.59%.
Hartmann said he tested short-term alpha using 25 combinations of holding periods and look-back periods, and found that in each case, funds with the best short-term alpha beat the benchmark, providing “a very strong indication of the validity of the model.”

“We’re proud of winning the Wagner Award,” said Plan To Invest Capital Management founder John Panter. “We believe it validates the active approach to managing investments that we follow. We believe that, long-term, active management can be more effective than traditional ‘buy and hold’ investing.”

NAAIM’s Wagner Award, created in 2009, is designed to expand awareness of active investment management techniques and the results of active strategies through the solicitation and publication of research on active management.

Plan To Invest Capital Management, Inc. of Greenwood Village, Colo., takes an active approach to managing client investments that has led to performance that is well in excess of its benchmark since the firm was founded in 2009. Please note that past performance does not guarantee future performance. In addition to active asset management, Plan To Invest, an affiliate of Plan To Invest Capital Management, Inc., provides financial planning, insurance services, credit and debt management, estate planning and other services.
Plan To Invest Capital Management, Inc.
Mike Hartmann