Going against the Grain
The Harvesting Strategy
Strategy by
Timothy D. D’Angelo
Investment Consultant
The Static Asset Allocation
Strategy



What you hear about from the media
The holding of stocks and bonds that match
your risk tolerance
The need to regularly rebalance your holdings
back to your original risk tolerance
The Harvesting Strategy
How farmers manage their homesteads
Plant - Tend - Harvest - Plan - Plant




In the spring they plant their crops
As the seasons move forward they tend to their crops
As fall gets closer they start to harvest portions
In the winter they plan on what crops to plant

Where do they feel their best opportunities are going forward
 That’s where they plant
Static Asset Allocation
vs.
Harvesting Strategy
When put side by side how do they differ?
The Debate:
When you rebalance - do you in fact
“Sell High to Buy Low”?
Static Asset Allocation
value of funds 1st of year
50
45
40
35
30
Fund A
Fund B
25
20
15
10
5
0
1st of Yr
Static Asset Allocation
fund values end of year one
60
50
40
Fund A
Fund B
30
20
10
0
1st of Yr
End of Yr 1
Static Asset Allocation
Rebalance
Sell High - Buy Low 
60
50
40
Fund A
Fund B
30
20
10
0
1st of Yr
End of 1st Yr
Start of Yr 2
Static Asset Allocation
value of funds 1st of year
50
45
40
35
30
Fund A
Fund B
25
20
15
10
5
0
1st of Yr
Static Asset Allocation
fund values end of year one
90
80
70
60
50
Fund A
Fund B
40
30
20
10
0
1st of Yr
End of Yr 1
Static Asset Allocation
Rebalance
“Sell High - Buy Low” ?
“Sell Higher - Buy High” ?
90
80
70
60
50
Fund A
Fund B
40
30
20
10
0
1st of Yr
End of 1st Yr
Start of Yr 2
Static Asset Allocation
value of funds 1st of year
50
45
40
35
30
Fund A
Fund B
25
20
15
10
5
0
1st of Yr
Static Asset Allocation
fund values end of year one
50
45
40
35
30
Fund A
Fund B
25
20
15
10
5
0
1st of Yr
End of Yr 1
Static Asset Allocation
Rebalance
“Sell High - Buy Low” ?
“Sell Low - Buy Lower” ?
50
45
40
35
30
Fund A
Fund B
25
20
15
10
5
0
1st of Yr
End of 1st Yr
Start of Yr 2
Harvesting Strategy
value of funds 1st of year
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st of Yr
Harvesting Strategy

The safety bucket’s primary focus is stability



All dividends and capital gains will be placed in the safety bucket







Its secondary focus is to keep pace with inflation
We always want to try and maintain our purchasing power
This is why we start and finish with the graphs showing first of and end of
year
Capital gains are most frequently paid in December
50% of all gains at end of year will be harvested
The ‘harvest’ indicator is ‘up 30%’
The ‘plant’ indicator is ‘down 20%’
Recognizing any ‘harvest’ or ‘plant’ opportunity resets an indicator
Taking into consideration all of the above will allow us to proceed
with the harvesting strategy most proficiently
Harvesting Strategy
value of funds 1st of year
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st of Yr
Harvesting Strategy
fund values end of year one
60
50
40
Fund A
Fund B
Fund SB
30
20
10
0
1st of Yr
End of Yr 1
Harvesting Strategy
Harvest 50% of Gain from Fund A - Sell High
Place Gain in Safety Bucket
Plant 25% of Safety Bucket to Fund B - Buy Low (down 20%)
*What the safety bucket offers us is the ability to
redeploy Gain when / if suitable
60
50
40
Fund A
Fund B
Fund SB
30
20
10
0
1st of Yr
End of 1st Yr
Start of Yr 2
Harvesting Strategy
value of funds 1st of year
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st of Yr
Harvesting Strategy
fund values end of year one
80
70
60
50
Fund A
Fund B
Fund SB
40
30
20
10
0
1st of Yr
End of Yr 1
Harvesting Strategy
Harvest 50% of Gain from Funds A & B - Sell High
Place Gain in Safety Bucket
*It’s OK for us to increase our safety bucket. This will
provide us with opportunity and choice going forward.
80
70
60
50
Fund A
Fund B
Fund SB
40
30
20
10
0
1st of Yr
End of 1st Yr
Start of Yr 2
Harvesting Strategy
value of funds 1st of year
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st of Yr
Harvesting Strategy
value of funds end of year one
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st of Yr
End of Yr 1
Harvesting Strategy
Fund A down 25% - Fund B down 20%
Plant 50% of Safety Bucket - 25% to each Fund
* Again we have created the ability to redeploy gain when/if it is suitable.
This is never a requirement. It comes down to what is most appropriate at
any given time for you to achieve your goals!!
45
40
35
30
25
Fund A
Fund B
Fund SB
20
15
10
5
0
1st Yr
End of 1st Yr
Start of Yr 2
Harvesting Strategy
How farmers manage their homesteads:
Plant - Tend - Harvest - Plan - Plant
How prudent investors manage their portfolios :
Buy - Monitor - Sell - Evaluate - Buy