Our Systematic Investing Process

When managing investment portfolios, Komara Capital Partners applies a systematic investing process, which provides rules that answer all questions about what, when, and how much to buy and sell.

We wanted our process to be sophisticated, yet straightforward, something we can talk about with our clients in plain English.

At a high level, our goal is to keep the process as simple as this:

• Price is king – it’s our chief input for decision-making
• We reduce exposure when prices fall
• We increase exposure when prices rise
• Our primary goal is to perpetually work from a higher base
• We believe the way to accomplish our goal is to preserve as much capital as possible during market declines, while still participating in market gains
• Our rules-based process is repeatable and can increase the chances of our clients staying anchored to their financial plans because it leaves no room for emotional decision-making during times of euphoria or fear

Time Diversification & Tax-Loss Harvesting

Our process creates tax-friendly investment strategies because we incorporate a blend of timeframes:

1. Intermediate-Term Trend Following: If the 10-day exponential moving average (EMA) is above the 100-day EMA at the end of the month, it represents an “uptrend,” and we increase exposure. If the 10-day is below the 100-day, it’s a “downtrend,” and we decrease exposure.
2. Long-Term Trend Following: If the 50-day EMA is above the 200-day EMA at month-end, we increase exposure. If it is below, we decrease.
3. Strategic: A portion of the portfolio is bought-and-held.

This time diversification leads to a tax-aware portfolios because:

• Shorter-term timeframes inherently sell losing positions quickly when prices fall
• Gains are held if uptrends persist, with longer-term timeframes usually allowing us to harvest a portion of gains after 12 months

The result is a smoothing out of the tax profile, as well as less choppy ride for our clients.

Daily Pricing Data Informs Monthly Allocation Changes

Although our process captures price data daily, we only act on it monthly.

This cadence is intentional because it optimizes our strategies. Monthly is the “sweet spot” between:

• Acting too quickly – may avert a drawdown but comes with the potential cost of missing out on sharp rebounds, with the added sting of realizing gains that could have been deferred
• Acting too slowly – can cause clients to overreact and risk permanent loss of compounding