(We write this blog for professional money managers. But as noted in yesterday’s post, today’s entry is targeted at retail investors. Please read our disclaimer, and always be highly suspicious of any investment advice proffered online.)

Unknown Unknowns

Professional money managers understand what we have accomplished with the GOCMX. But people who don’t do this for a living often admit to being a bit confused by it all. What does the GOCMX do? How can it help me invest?

We think that people who invest, but not for a living, may be a bit confused on this topic because they don’t know what they don’t know. Asset allocation? Don’t get it. Portfolio optimization? Risk-adjusted return? Asset weightings? Nope, don’t get it. Our methodology is so powerful, in part, because it touches several areas of portfolio theory and application. For the same reasons, it can be confusing to the uninitiated.

So this post is intended to widen the audience a little…

Not Only What to Buy — But How Much

Our Globally Optimized Capital Markets Index, or GOCMX for short, is basically an allocation model that knows one thing: It knows what you should own, and how much of it you should own, in order to drive the best possible returns. Simple, right? And yes, it knows this — it’s not just guessing here, and it’s not making any kind of forecast about the future. (Such forecasts can always be wrong.)

Our methodology works like this: You decide what kind of securities you’re interested in — for example, the stocks of companies with strong balance sheets, low P/E ratios, and robust recent performance. Or even the stocks already in your portfolio. We then determine how much of each stock you should own (if any).

Before we developed the GOCMX, we couldn’t have told you how much you should own in, say, stocks versus bonds, to generate the best risk-adjusted performance. Now we can. Ditto for stocks versus commodities, soybeans versus wheat, Microsoft versus Cisco, or Microsoft versus wheat.

We know exactly how much a global-macro investor should be underweight any given asset right now, in order to have achieved the most competitive risk-adjusted return (or downside risk, if you like) over the past year — or indeed, over any time period that you like. And you don’t know this.

(“But I’m not a global-macro investor,” you say. Our methodology applies to any basket of assets that trades.)

To recap: Given a list of stocks, bonds, whatever, we know what the best-performing portfolio looks like. We know what should be in that portfolio, and how much of each asset to own. Simple.

What You Don’t Know Is Costing You

You woke up this morning (afternoon?) at a disadvantage because you don’t know where your starting allocation should be to anything — including assets already in your portfolio.

No matter what your investment strategy or target universe — oil & gas stocks, wireless communications equipment, AA bonds, a hedge fund focused on agricultural futures, retail brokerage accounts for high net-worth individuals, or stocks you have with your broker — your disadvantage begins with not knowing how far you are from an optimal asset weighting.

E-mail us is to learn more. Subscribe to the GOCMX. Read about our custom analytical services. We realize that you may have unique investment constraints, portfolio turnover and average holding-period targets, redemption requests and all the rest. Whether or not any of these factors apply to your particular investment approach, we can help you tweak your exposures for better performance.

Don’t Get Financial Advice Online

We do not give investment advice, and recommend that you not take investment advice from any online source. Rather, you should always consult a qualified investment professional before making any financial decision. Our tools can help you ask the right questions of your advisor, and work with her on a more informed level. ♦