The main investment strategy for Beta Management Company is that of timing the market. Basically this means that investors focus on predicting trends in market returns and try to expose more or less of the company’s assets to those returns depending on their analysis of what they think will happen in the upcoming future. Beta Management Co. times the market by exposing between 50 and 99 percent of its assets to a market index fund, placing more or less of itself on the market depending on the analysts’ expected upcoming market trend. Beta Management tries to make huge profits during great economic years and either vastly minimize losses or make a profit against the market during bad economic years all by increasing or decreasing its exposure to a market index. Using market timing as the main investment strategy for their companies’ assets is a very inexact science. It makes sense to some people to decrease market exposure right before a market bubble bursts and increase exposure right before a boom to maximize profits. That being said, it seems nearly impossible for Beta or anyone else to be sure of how long a boom will last or even how high an index will rise because there are too many factors that influence the market and because it’s impossible to predict the future. Malkiel though, pointed out that returns on the market resemble a random walk behavior and that one could not predict the future returns consistently at all. 3.
As of January 4, 1991, Beta Management had about 19.8 million dollars invested in the Vanguard index fund. This was equal to 79.2% of the 25 million in total assets that Beta Management managed. During 1990 the amount of equity was reduced to 50%, because of a large two-month market decline. She began moving money back into the Vanguard fund at around October of 1990, to get her back to 19.2% equity. Because of her success she was able to double the size of Beta Management in about six months. She was also losing some...
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