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Tactical Investing Works Seamlessly With IRAs

After opening the discussion on tactical investing in part 1, Axos SVP Tracy Gallman and Meeder Investments’ CEO Bob Meeder get deeper into the origins of the philosophy, as well as how it can integrate into existing retirement accounts.

Q | Tracy Gallman

Tracy Gallman: Can you share the story of Meeder Investments? How did the company come about and how has your firm evolved?

A | Bob Meeder

Bob Meeder: It goes way back. On April 1st, 1974, my dad started the company in the middle of the second-worst stock market decline since the Great Depression. A lot of people thought he was crazy to start an investment management firm in that kind of a market environment. So did he…but he had a discipline, which he called defensive investing.

In today's terms, it’s a tactical strategy. He really wanted to provide a solution that allowed investors to participate in good market environments. But if the market got into a bad market environment, he would shift and reduce their investment into either bonds or cash to protect them. That's why I called it a defensive investing strategy and that strategy is still in place today. In fact, we've been told that we may have the longest track record in the country for our tactical strategy.

He started out with what we call separate accounts and then as they were more successful, he decided to get into the mutual fund industry. We continued to expand our mutual funds and we've continued to evolve the firm and work in a lot of different areas and serve a lot of different types of investors in trying to meet their investment needs.

Q | Tracy Gallman

TG: If we look back on 48 years and all the different market conditions we’ve been through, how do you think investors benefit from all that experience Meeder provides?

A | Bob Meeder

BM: Well, I've been in the business 38 years. I started in late ‘82, early ‘83, but during those almost 50 years, we've had to navigate rising interest rates, declining interest rates, inflationary environments, deflationary environments, even stagnation.

We've experienced two secular bear markets, the bursting of the dot-com bubble, and the financial crisis of 2008. We've had to deal with just about any kind of market environment that one could imagine.

And how does our strategy benefit investors? Many, many investors get caught up in what we call the cycle of emotion. Many investors, because they don't have the time, the inclination, or the knowledge, buy into the market when things look really good rather than buying in when it's depressed.

So they buy in at market highs, but when the market rolls over and goes into a decline, they get emotional and sell. That's the cycle of emotions they get caught in.

I just saw a recent study of the Dow S&P 500 Index from the lows of 2009 until the end of 2021. Even though the market's up on average nearly 16% a year, the average investor has only achieved a 6% return. That's because they get caught up in that cycle of emotions. That’s what a tactical strategy is really designed to accomplish. It helps investors eliminate that cycle of emotion and stay committed to their investment strategy.

They know someone's trying to manage the downside for them when they get into high-risk market environments. And so, because they know someone's doing that and looking after that for them, rather than just staying in the market and riding through those cycles, they stay committed to their strategy. It's really a risk mitigation approach designed to increase the probability that investors can stay committed to their investment strategy.

Q | Tracy Gallman

TG: You said that Meeder has seen a couple of secular bear markets. Can you define that for investors who might not fully understand what that means?

A | Bob Meeder

BM: Secular markets indicate long-term, multi-year trends. So there are secular bull markets and there are secular bear markets. Secular bull markets are a long-term upward trend of the stock market. For example, we're in a secular bull market right now that started in March of 2009. The one that proceeded that was from August of 1982 until 2000.

Secular bear markets are long-term sideways to down markets. So 2000 through 2009 was a secular bear. If you look at the charts, there was a secular bear market from the middle part of the 1960s until 1982. After all those ups and downs, the ending point of the Dow Jones Industrial Average was essentially flat for that whole time frame. I mean, it wasn't just straight across, there were a lot of ups and downs, but the sum of it all was basically zero.

Q | Tracy Gallman

TG: We have a lot of clients who are preparing for retirement and have a traditional or Roth IRA. How should they think about positioning a tactical strategy into their retirement investment portfolio?

A | Bob Meeder

BM: There's an absolute place for it. If you take the person who's 65 or 70, what's their life expectancy? It's 20 to 25 years. They still have a long-term timeframe, and they need to structure their portfolio to keep ahead of inflation. So, they must have a mix between stocks and bonds in a diversified portfolio. This allows them to have some exposure to the stock market but know they're going to be protected in a longer-term, higher-risk market environment.

This strategy allows them to have a little bit more exposure to the stock because there's that risk mitigation on the downside. It should allow them to get a better return and stay ahead of inflation over their retirement distribution phase.

Tactical investing...allows (investors) to have some exposure to the stock market but know they're going to be protected in a longer-term, higher-risk market environment.
— Bob Meeder

Q | Tracy Gallman

TG: What are your thoughts around investors potentially blending this tactical philosophy through a Muirfield position into their portfolio alongside a more strategic, passive type approach. Would that type of a blend combine well together in an overall portfolio?

A | Bob Meeder

BM: Absolutely. Totally. In fact, it has historically worked very well. If you just put all your money in a passive, strategic approach, then you're going to be subject to the full downturns. If you have some passive or strategic and a tactical approach together, you'll often get good participation on the upside, but that volatility and the declines will be less than that strategic buy and hold approach. And it allows the investor to stay more committed to that strategy.

Go back and check out part 1 of Tracy and Bob’s discussion. In the concluding part 3, the pair go deeper on how to take the emotion out of making critical investment decisions.

If you have questions about tactical investing or would like a demo of the Axos Invest Self-Directed Trading tools, reach out to a licensed Axos relationship manager. You can connect with one of our specialists by phone at 1-888-585-4965 or email us at [email protected].

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Meet Bob Meeder
and Tracy Gallman

Bob Meeder joined Meeder Investment Management in 1983, becoming President and CEO in 1995. Under his leadership, Bob has been instrumental in developing the firm’s tactical investment positioning system. Meeder's assets under management are over $25 billion, as of Dec. 2021.

Tracy Gallman has 30 years of experience in the financial services industry. Tracy previously served as Senior Vice President with LPL Financial and PFS Investments before overseeing all Axos Invest strategy and product development in 2021.

About Meeder Investment Management

Meeder Investment Management was founded in 1974. Located in Dublin, Ohio, Meeder has over 100 professionals serving the financial needs of individuals, corporations, and government entities, with over $25 billion in assets under management, advisement, and administration.

Meeder mutual funds are available now in the Axos Invest Self-Directed Trading platform.

Keep the Conversation Going

Check out Part 1 of Tracy and Bob’s discussion, about the value of tactical investing, and Part 3, where the pair go deeper on how to take the emotion out of making critical investment decisions.