8 minute read
Key Takeaways
- DunhamDC is an unemotional investment overlay and algorithm designed to buy during fear and sell during periods of market greed.
- Inspired by Warren Buffett, Benjamin Graham, and the concept of “Mr. Market,” DunhamDC seeks to exploit emotional market extremes.
- As markets rise, DunhamDC systematically reduces equity exposure; during declines, it increases exposure.
- This disciplined approach aims to help mitigate sequence risk and potentially shorten recovery times after market downturns.
- DunhamDC applies systematic portfolio adjustments rather than human judgment, helping advisors stay disciplined during volatile markets.
Just a few weeks ago, DunhamDC once again rebalanced itself as markets surged amid widespread optimism and growing investor euphoria.
As prices climbed, the DunhamDC 60/40 strategy (“DC 60”) adjusted to a 33/67 equity-to-fixed-income allocation, strategically selling into elevated market levels rather than chasing momentum.
If you’re unfamiliar with DunhamDC, you may be asking:
What exactly is DunhamDC - and why does it matter?
Simply put, DunhamDC is an unemotional investment overlay and algorithm designed to dynamically adjust equity exposure based on market conditions, with the goal of reducing behavioral mistakes and managing downside risk.
How DunhamDC Works: Buying Fear and Selling Greed
At its core, DunhamDC is not just another investment strategy; it is a philosophy - one that draws inspiration from the timeless wisdom of two of the greatest minds in investing: Warren Buffett and Benjamin Graham.
Known as the "Oracle of Omaha," Warren Buffett is revered for his sage advice and incredible success in the world of finance.
And Buffett's wisdom was influenced by the insights of Benjamin Graham – who is regarded as the "father of value investing."
Graham illustrated the emotional unpredictability of the stock market through the character of “Mr. Market”.
Therefore, DunhamDC was inspired by Warren Buffett's timeless advice, "Be fearful when others are greedy and greedy when others are fearful,” and aims to leverage the swings in Mr. Market's moods.
Simply put, DunhamDC Buys Fear and Sells Greed.
Understanding DunhamDC’s Buy Fear, Sell Greed Philosophy
While the concept is simple, execution is not.
During market declines, fear dominates headlines and emotions, making it extremely difficult for investors to add risk. Conversely, during strong rallies, greed and fear of missing out (FOMO) make it hard to reduce exposure.
This is precisely where most investors—and many strategies—fail.
DunhamDC removes emotion from the equation.
By leveraging the Dykmans Curve - the “DC” in DunhamDC, named after its creator Ryan J. Dykmans, CFA, CIO of Dunham—the strategy systematically adjusts exposure based on market movements rather than sentiment.
What Makes DunhamDC Different
DunhamDC is designed to:
- Avoid Emotional Pitfalls – removing the bias of emotions and the irrational investing decisions they feed.
- Help mitigate Sequence Risk - may offer better preservation of retirement income during market downturns.
- Potentially faster Recovery Times – minimizes long-term losses and accelerates post-bear market recovery.
- Reduce Concentration Risk: Diverse portfolio options reduce concentration risk.
Whether it's buying fear during market downturns or selling greed during periods of exuberance, DunhamDC stays steadfast in its commitment to unemotional and disciplined investing principles.
In short, this means holding less risk near market peaks and more risk near market bottoms - the opposite of how most investors behave.
A Real-World Example: DunhamDC in Action
Ask yourself:
Would you rather hold more equities when prices are high and downside risk is elevated—or when prices are lower and long-term opportunity is greater?
DunhamDC is designed around that question.
Below is a visualization of the DunhamDC 60/40 strategy, showing how it systematically sells as prices rise and buys as prices fall - unemotionally and consistently.
This approach aims to minimize sequence risk and improve recovery dynamics following market downturns.
Why Financial Advisors Need Tools Like DunhamDC
Today’s investing environment presents unique challenges:
- A demographic wave of retirees, with roughly 10,000–12,000 baby boomers reaching retirement age daily
- Longer lifespans, increasing the strain on retirement assets
- Greater market volatility and global interconnectedness, allowing shocks to spread rapidly
- Widespread behavioral biases, which undermine rational decision-making
Individually, these factors pose challenges.
Together, they create a perfect storm.
This is where DunhamDC serves as a powerful overlay for financial advisors, helping protect clients from emotionally driven mistakes while navigating volatile market cycles.
Learn More About DunhamDC
We believe DunhamDC represents a disciplined, behaviorally aware approach to investing—one that challenges conventional buy-and-hold assumptions.
By blending timeless investing wisdom with systematic execution, DunhamDC seeks to help investors and advisors navigate markets with greater confidence and rationality.
To learn more about DunhamDC portfolios and allocations, visit our Dunham Insights page or contact us at (858) 964-0500.
Also please feel free to visit our Dunham Insights page for more information on the DunhamDC allocations and materials.
Sources:
https://www.cdc.gov/nchs/data-visualization/mortality-trends/index.html
https://gustdebacker.com/cognitive-biases/
Disclosure:
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
Past performance may not be indicative of future results. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There may be economic times where all investments are unfavorable and depreciate in value.
DunhamDC (“DunhamDC”) is a proprietary algorithm of Dunham & Associates Investment Counsel, Inc. (“Dunham”) that seeks to mitigate sequence risk, which poses a threat to an investor's returns due to the timing of withdrawals. The algorithm employs what Dunham considers to be a pragmatic strategy, generally making incremental increases to the equity allocation when global stock market prices decrease and decreasing it when global stock prices increase. This approach is objective, unemotional, and systematic. Rebalancing is initiated based on the investment criteria set forth in the investors application and is further influenced by the DunhamDC algorithm.
Due to the large deviation in equity to fixed income ratio at any given time, investor participating in DunhamDC understands that a large deviation in equity to fixed income ratio can have significant implications for the risk and return profile of the account. Accordingly, during periods of strong market growth the account may underperform accounts that do not have the DunhamDC feature. Conversely, during periods of strong market declines, the account may also be underperforming, as the account continues to decline, due to the higher exposure in equities. Similarly, if the fixed income investments underperform the equity investments, it is possible that the accounts using the DunhamDC feature may underperform accounts that do not have the DunhamDC feature, even though they may have adjusted the exposure to equity investment before a decline. Therefore, the investor must be willing to accept the highest risk tolerance and investment objective the account can range for the selected strategy. Please see the Account Application for the various ranges.
DunhamDC uses an unemotional, objective, systematic approach. The algorithm does not use complex formulas and is designed to create a consistent process with limited assumptions based on historical data.
DunhamDC may make frequent purchases and redemptions at times which may result in a taxable event in the account and may cause undesired tax-related consequences.
Trade signals for DunhamDC are received at the end of each trading day with the implementation of the trades not occurring until the next business day, which means that there is a one-day lag that may result in adverse prices.
DunhamDC operates within predefined parameters and rules, some or all of which may not be available to review. While this approach can reduce emotional biases and enhance consistency, it may limit adaptability to changing market conditions, economic considerations, or unforeseen events. Extreme conditions may require deviations from the program’s prescribed approach, and such adaptability may be challenging to incorporate. The DunhamDC algorithm is programmed based on specific criteria and rules, it may not capture certain qualitative or contextual factors that can impact investment decisions or movement in the markets. Beyond the initial assumptions used to develop the algorithm, it lacks other inputs or considerations that human judgement and discretion may be necessary to evaluate. DunhamDC may utilize historical data, statistical analysis, and predefined rules. It does not make any predictions and may add to certain investments before they perform poorly or may divest from other investments before they perform well. Dunham makes no predictions, representations, or warranties as to the future performance of any account.
Accounts invested in DunhamDC are subject to a quarterly rebalance to its target allocation at the time based on DunhamDC in addition to the signals provided by DunhamDC at any given time.
Dunham makes no representation that the program will meet its intended objective. Market conditions and factors that influence investment outcomes are subject to change, and no program can fully account for all variables and events. The program requires making investment decisions based on factors and conditions that are beyond the Account Owner’s and Dunham’s control.
DunhamDC is NOT A GUARANTEE against market loss or declines in the value of the account or a timing strategy. Investor may lose money.
Asset allocation models are subject to general market risk and risks related to economic conditions.
DunhamDC has a limited track record, with an inception date of November 30, 2022.
**The investment strategy of DunhamDC is powered by the DC algorithm, focusing on the principles of price and time. Utilizing multiple “zones” or trigger points, the algorithm systematically identifies market sentiment,
selling into strength during periods of euphoria and greed, while capitalizing on opportunities duringtimes of pessimism and fear. This allows DunhamDC to adapt dynamically to changing market conditions.
DunhamDC is NOT A GUARANTEE against market loss or declines in the value of the account or a timing strategy. Investor may lose money. Asset allocation models are subject to general market risk and risks related to economic conditions. The chart represents the trade signals when the equity allocation increased (green arrows) or decreased (red arrows) over the period shown. See reverse for Important Disclosures.
1 Market Growth represents the MSCI All Country World Index (ACWI).
The MSCI All Country World Index (ACWI) is a stock index designed to track broad global equity-market performance. Maintained by Morgan Stanley Capital International (MSCI), the index comprises the stocks of nearly 3,000 companies from 23 developed countries and 25 emerging markets.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.