The word “fiduciary” gets thrown around a lot in finance. Some people use the word to sound trustworthy. Most of the time, it means very little to the public, but it should. So, I want to explain what the word means to me, and why I earned the right to use it.
Two Things Back It Up
The first is a license. In every advanced economy, securities regulators license fiduciaries to act strictly in their client’s interest and not their own. I hold a United States Series 65 license. That license is currently inactive, and it expires at the end of May. A license, on its own, however, only proves that someone passed a test once. It does not prove how a person works day to day.
The second thing is what this article is really about. It is a written rulebook I follow every single day. I call it the Cara Fiduciary System, or CFS for short. CFS is a work in progress. The version I use today is Version 7.0, which I plan to keep improving for as long as I serve the public.
CFS is the reason I can call myself a fiduciary with or without the license. It is also the reason my subscribers and readers can trust that what I say on Monday will line up with what I said last month, and with what I will say next year.
The Problem CFS Was Built to Solve
I have spent sixty years around financial markets. In that time, I have watched a lot of smart people give bad advice. Not because they were dumb. Because they were human.
Every person in finance has biases. We have favorite stocks. We have opinions about politics that bleed into our forecasts. We have employers, clients, and friends who want to hear certain things. We get scared during selloffs and greedy during rallies, just like everyone else.
The transactional world we live in rewards all of this. It rewards confident-sounding opinions. It rewards stories that make people want to buy or sell. Unfortunately, it does not reward consistency, and it really does not reward saying “I do not know.”
I wanted to find a way to act and speak about markets without any of that getting in the way. Not a trading system. Not a way to beat the market. A way to look at the world the same way every day, regardless of how I felt that morning, regardless of what was in the news, regardless of who was asking. That is what CFS is. It is a discipline that forces me to be consistent.
Two years ago, facing the prospects of an aggressive cancer, forced into inactivity, I took the time to think about life. I had always loved the market but I needed to see the reality, to put an end to the nonstop biased narratives that were causing anxiety and depression. I needed a system that would consistently overcome these challenges. So I started developing one. For the first time in my life, I had the time.
What CFS Actually Does
Every day, CFS looks at about 2,500 financial instruments across roughly 30 global markets. That includes stocks, exchange-traded funds, bonds, currencies, commodities, and more.
For each one, the system runs the same checks, in the same order, using the same math. It does not care whether I like the company. It does not care what the news is saying. It does not care what I said about the stock last week. It just runs the rules.
In sixty years, I have never seen another person do this. I do not say that to brag. I say it because it is the honest answer to why I think the word “fiduciary” fits.
How CFS Is Built
I will not give away the operational details. Subscribers pay for those, and that is fair. But bear with me as I describe the shape of the system so that you understand why it works.
CFS has two big parts: a fundamental filter and a technical filter. They work together. Neither one is allowed to act alone.
The fundamental filter asks the question: Is this a quality company? I use a commercial tool called Ziggma to help with this part. Ziggma scores companies against their peers across four areas: how fast they are growing, how much profit they make, whether the price is reasonable, and whether the balance sheet is healthy. CFS sets minimum standards for each of those four areas. A company that fails the standard does not get on the watchlist. It is that simple.
The technical filter asks a different question: Is now a sensible time to act? This is where my own measure, called INSTAT, comes in. INSTAT looks at price behavior across eight different time windows, from very short to very long, and produces a single score from minus 100 to plus 100. A deeply negative score on the longer windows means the price has likely been falling for a while and may be near exhaustion. A deeply positive score means the opposite.
The system never relies on one score alone. To buy, a name must pass through four gates in order. To sell, two different signals must agree. A single bad reading is never enough to act on. This is what I call the conjunction rule, and it is the heart of the discipline.
Why Two Filters Matter
Here is why this matters in plain terms.
If you only look at fundamentals, you can buy a great company at a terrible time, and watch it fall for a year before you are made whole.
If you only look at technicals, you can buy a falling stock that looks oversold, only to discover the company itself is breaking down. The chart was right that something was wrong. You just did not know what.
The two filters protect against each other’s blind spots. Quality without timing is impatience. Timing without quality is gambling. CFS refuses to do either.
Why Some Instruments Skip the First Filter
Ziggma scores stocks listed in the US, plus a small number of others. It does not score exchange-traded funds, indexes, currencies, or commodities. Those instruments do not have direct peers in the way a single company does, so a comparative quality score is not available.
For those, CFS uses a different path. INSTAT carries the full weight, and the system applies extra safeguards: the instrument must trade with enough volume to handle a real position, and it must fit the purpose of the portfolio it would go into. Macro instruments like bond yields and currencies are read for context only. They are not bought or sold as portfolio positions.
This is one of the changes I made in Version 7.0. Earlier versions did not handle these cases as cleanly.
What the Cara Fiduciary System Means for My Followers
If you read my Weekly Global Market Navigator, my Cara Playbook, or any of my portfolio reports, you should know what you are getting.
You are not getting my hunch. You are not getting yesterday’s news repackaged. You are not getting a tip from a friend in the business. You are getting the output of a system that has been running on the same rules, applied the same way, to thousands of instruments at once. If I change my view on something, it is because the data changed, not because I did.
When I say a name belongs on the watchlist, it means that name passed the fundamental filter. When I say a name is ready to consider, it means it has cleared three of the four gates and is waiting on the manual chart review. When I say it is time to sell, it means two independent signals have agreed.
When I have nothing to say, I say nothing. That is also part of the discipline.
Always a Work in Progress
CFS is on Version 7.0 because it has been through six earlier versions, and there will be more. I revise it as subscribers and associates ask hard questions, as markets change, and as I find weaknesses in my own thinking.
Version 7.0 added the four-dimension fundamental filter and a formal discipline for terminating positions. Earlier versions were less precise about both. The next version will fix something I have not yet noticed. That is how this works.
A fiduciary is not a person who claims to be right. A fiduciary is a person who has built a way of working that does not depend on being right. The rules carry the weight. I just follow them.
That is what I mean when I use the word fiduciary.
Bill Cara is a licensed fiduciary investment manager with sixty years of experience in global financial markets. His work has been recognized by Forbes, Barron’s, and The Wall Street Journal. He publishes it at billcara.com.