Horizon™ Action Reports FAQs

Where can I see a sample Action Report?

Each Action Report consists of the following two main sections.

  • Current Subscription Refund Guarantee Results. A performance chart comparing Horizon's performance to its two performance benchmarks.
  • Model Portfolio Allocations. A table showing each of the funds available to you, and Horizon's score of each fund and corresponding percentage allocation.

Click to see a sample Action Report for one of our company supported plans.

Are there any fees associated with making reallocations?

No. If you are reallocating within a company plan or within investments held at a single mutual fund company, you will pay no fees for the transactions associated with reallocating your account.

In fact, the fee you are charged by your plan administrator and/or mutual fund company (this fee is transparent to you) includes the ability for you to make reallocations.

Some funds themselves charge penalties if you buy and sell them within specified holding periods.

Horizon will exclude most funds that include holding periods longer than 30-days. However, in cases where holding periods are unavoidable the Horizon Reallocation Process and corresponding Reallocation Worksheet provided step-by-step instructions for avoiding any fees.

How can I use the information provided in the Action Report?

You may use the Action Report's Model Portfolio in one of three ways.

  1. Apply the Model Portfolio EXACTLY to your portfolio.
    The vast majority of subscribers apply the Horizon Model Portfolio exactly, as it has been proven to provide excellent results.
  2. Apply the Model Portfolio to a PORTION of your portfolio.
    Some subscribers apply Horizon to a percentage of their portfolio until they become comfortable with the process and begin to see the results for themselves. Others want to keep a percentage of their portfolio in fixed income investments at all times and use Horizon to manage the remainder.
    The Horizon model will never consider company stock in the Model Portfolio due to over diversification concerns (think Enron, United Airlines). However, if you want to—or are required to—hold company stock, then you can use Horizon to manage everything else.
  3. Use the Model Portfolio to CONFIRM your decisions.
    Horizon is designed to help you make better-informed reallocation decisions, but not necessarily to be the ONLY source. For the more astute investor, the analysis provided by Compass Investors may be just one source of information they use to confirm their own reallocation decisions.

Regardless of which approach you use, the very fact that you will be reviewing your account 10-11 times per year virtually assures that you will assume less risk by being properly aligned with the market.

How does the Horizon computer model decide what funds to invest in?

The computer model follows a 5-step process.

  • Each mutual fund in your portfolio is first divided into multiple time slices.
  • Next, the direction (up or down), degree (angle of movement) and the duration (elapsed time) of each time slice are evaluated.
  • A weighting is then applied to each time slice.
  • The sum of each of the time slice weightings are added together to produce the Score for the fund. The Score is included in the Action Report
  • A percentage-holding amount is then determined for each fund based on the relative Scores of each of the fund choices. The Percentage is included in the Action Report.

The number of time slices, the weighting algorithms and the percentage amounts are the results of five years of extensive study by the Compass Institute.

They tested over 500,000 possible permutations of factors to come up with the correct combination that would provide the optimal results when applied to any combination of mutual funds.

Do I have to follow the Horizon Model Portfolio exactly?

It is important to remember that you are ALWAYS in control of your reallocation decision. Most subscribers follow the Model Portfolio exactly, as it has been proven to provide excellent results.

However, for whatever reason, you may occasionally want to do something different than what the Model Portfolio may suggest.

The Horizon model does not try to predict or call the tops or bottoms of markets. Rather, it adapts your portfolio to the ever-changing market tide as it unfolds.

Horizon is designed not to OVER react – that is, move out of or into a fund too soon – and you may feel that our analysis may be slow to react to what you (or others) believe may be a changing market.

While it would be ideal if the model would get you into and out of each fund at exactly the right time, this is not realistic. But once a market direction is confirmed, you can be assured that Horizon WILL properly position you for the next sustained moves, either up or down. Meanwhile everyone else will remain locked into increasing losses (in down markets) or reduced gains (in up markets) due to following a formulaic approach.

EXAMPLE: If you firmly believe that the market is going to go down and want to respond more aggressively to the Model's move into fixed income funds, then you may elect to move a larger percent of your money into those "safer" investments sooner. Sometimes you may be better off doing that, and other times you may not be. Nevertheless, that kind of guess work is what gets most people into trouble, as the markets do not always respond to logic.

Regardless of which way you choose, the very fact that you will be reviewing your account 10-11 times per year virtually assures that you will assume less risk by being properly aligned with the market.

Why are target date funds and balanced funds excluded from the Horizon Model Portfolio?

Target Date Funds (TDF) are typically constructed by the mutual fund company using proprietary stock and bond funds to follow a traditional asset allocation approach, having a pre-determined and fixed percentage mixture of stock and bond funds. TDFs and most balanced account funds represent in and of themselves a set-it-and-forget-it strategy that our Adaptive Asset Allocation™ strategy both competes with and has been proven superior to.

Also, the Compass Institute back-tested fund collections both with and without TDFs and found that the long-term performance of Horizon was better for those portfolios that excluded TDFs.

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