Has the strategy – a traditional bastion of sound portfolio construction – seen its day? No… but it hasn’t made a full recovery since its 2022 bout of underperformance either. Of course, markets do not operate in a vacuum; economic uncertainty, geopolitical crises and public policy decisions can create a difficult investing environment with few safe harbors.

Despite reports of its demise being exaggerated, advisors and investors seeking capital protection with downside protection have been forced to confront the inherent constraints of the 60/40 model. It’s important to note that those limitations are a function of both the asset classes themselves as well as portfolio designs that bundle them together in an effort to optimize outcomes.

We know that “past performance is not an indication of future results.” Yet, many market participants invest as if it is. Some financial advisors point to the maxim to temper client expectations, yet don’t always use its underlying principle to inform their own decisions. Product platforms create target-date funds that, while deploying a glide path strategy to shift holdings over time, continue to allocate portfolios using probabilities suggested by past performance.

Correlation coefficients do not cut it anymore … now what?

In designing traditional investment portfolios, risk/reward expectations are set by the historical probabilities and correlations of the portfolio’s holdings.

Such data is not a solid foundation for asset protection, particularly for risk-averse investors. In an ideal world, advisors could take a more direct approach to managing risk and capturing returns – one that doesn’t rely on historical relationship patterns and assumptions.

The question is how. The answer:

Rethink how you manage risk and capture opportunity

Create solutions that feature a curated combination of traditional and non-traditional investments designed to offer growth potential while aiming to limit downside loss to a pre-set level – although outcomes are not guaranteed. The process begins with your client’s response to a simple, yet profound, question:

What are you willing to lose?

The need for such portfolios is the genesis of the Tactical Option Defined Strategies (TODS) solutions designed by Amplify’s Investment Solutions Team. Time bound, liquid, and linked to the performance of an underlying mainstream stock index, each strategy pairs the risk-mitigation characteristics of call options with the security of U.S government securities to limit losses without forfeiting upside potential or portfolio liquidity.

Our expertise. Your advantage.

Discover how Amplify’s investment specialists and TODS portfolios can complement your current portfolio strategies and expand the tools you have to support clients in diverse market environments. By incorporating structured, risk-aware strategies, you can broaden your service offering, spend more time building strong client relationships, and position your practice for ongoing growth — all with the support of our experienced team behind you.

Important Information

Amplify Technology, LLC (“Amplify Technology”) provides technology and support services for financial professionals and does not provide investment advice or recommendations. TODS Defender strategies are offered through Amplify Financial, LLC, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Investment strategies described herein are designed to target capital preservation and market participation, but are not guaranteed. All investments involve risk, including possible loss of principal. Options strategies may expire worthless and are affected by market conditions, interest rates, and volatility. Investors should consult a registered investment adviser to determine whether any investment strategy is appropriate for their personal circumstances.

¹ Historical Returns on Stocks, Bonds and Bills: 1928-2024