Proprietary Investing Strategy Clients Should Understand These 3 Concepts

16 June 2021
 Categories: Finance & Money, Blog


Folks working with a proprietary investment strategist are usually going to hear a handful of key concepts thrown around. You're probably going to be fairly familiar with most of the terms, but it's important to understand how professionals use them in proprietary investing. Clients need to be familiar with these three concepts as they discuss proprietary investment strategy solutions.


A cornerstone of any strategy is developing a model. This is a description of how you expect different aspects of the strategy to work. If someone is worried about how inflation might eat away at their retirement income over the next 20 years, for example, it would be helpful to model how you expect the worst-case scenarios for inflation over that span to go.

Notably, the models are often critical to making a strategy proprietary. Every individual or organization is going to have different concerns, and a proprietary investment strategist will try to create models that account for those issues. A business might need to model the likelihood of a recession to determine how aggressively it should invest its capital without taking major risks. Conversely, a young person trying to get ahead financially may model the exact same problem with an eye toward the potential upside of buying the bottom the next time the economy legs downward.

Forecasting and Probabilities

Most models try to forecast the likelihood of certain events or conditions. A real estate investment firm, for example, might attempt to forecast the chances that the housing market in a particular region will boom in the next 5 years. If the odds seem good, they may try to buy properties early and cheaply to get in front of the expected competition.

No one can tell you for sure what the future holds. However, they can look at the probabilities of certain outcomes. In the real estate example, a strategist might assess the probability that the market value of a house in a depressed area will go up 50% in the next half-decade. If current prices seem to not reflect the chances of a boom, then an investor may take that as a buy signal.


All investments carry risks. Proprietary investment strategy solutions need to evaluate the risks inherent in a target investment. You can then use this to determine whether you want to invest. Likewise, you can address risks by diversifying your investments to reduce the odds that a couple of misfires will wreck your efforts.

For more information, contact a company like Stock Wealth Safely.