Our Approach
You are reading this because you are looking for something.
Perhaps you are a really good saver, maybe you are a successful business owner, you’re at or near retirement, or maybe you recently came into some money. And you know that managing your money is critically important.
But you also know investing your nest egg is complicated, requires a lot of attention and you would benefit from an experienced hand. Maybe you tried to manage your money yourself and you weren’t all that comfortable, or maybe you had an advisor who you felt was not right for you. Or perhaps you just don’t know where to turn, so you’re seeing what’s out there.
You’re looking for an advisor to partner with, who you can trust, to expertly handle your money management so you can focus on what makes you happy – your family, job and life aspirations.
If this sounds like you, great. This story is typical of our clients and it’s a good starting point. So now let’s get technical.
You’re looking for an advisor to partner with, who you can trust, to expertly handle your money management so you can focus on what makes you happy – your family, job and life aspirations.
INVESTMENT MANAGEMENT
Our mission is to build investment strategies that help investors reduce risk while enhancing overall returns, preserve capital in down markets, generate competitive returns in up markets and strive to outperform our benchmarks. We do this by employing Nobel prize-winning investing concepts, advanced statistical analysis of market fundamentals, market trends, and advanced risk management techniques.
RISK MANAGEMENT
With any investment strategy there is a degree of risk. We clearly see this played out in the volatility of investment markets. But there are ways to construct portfolios with a view toward managing investment risk.
Your investment policy statement tells us how much risk you are comfortable with. With that information we know how much risk you are willing to take. This is the first risk management tool that we use.
Another level of risk management comes from maintaining a diversified portfolio of assets and asset classes, where some assets have low return correlation to others. When we use asset allocation principles in portfolio construction, this type of risk management is implemented.
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We keep a watchful eye and monitor your investment plan often. Periodic rebalancing of your portfolio helps to ensure that your asset allocation remains true to target class proportions. Rebalancing prevents over or under representation of certain asset classes, which could dilute the risk management aspect of asset allocation.
In addition, market conditions can signal a need to move away from risky assets. As your priorities shift or market forces change, we adjust your plan accordingly.
Maintaining your individual comfort zone is of primary importance. This is why we will create the right balance in asset allocation. We will also be sure your goals are manageable and, above all, that you avoid unnecessary risk.
ASSET ALLOCATION
When it comes to managing your investments, we believe that asset allocation and diversification are the keys to building and preserving wealth. Asset allocation is simply the percentage of your portfolio invested in stocks, bonds and other types of assets such as real estate, gold, oil and so on.
Your asset allocation, which is outlined in an Investment Policy Statement that we create with you, is based upon your personal goals, appetite for risk, time horizon and the amount of capital you have to invest. Accordingly your results will be unique to you.
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There is quite a science to asset allocation and security selection. This process is referred to as Modern Portfolio Theory and a number of Nobel prizes have been awarded for academic research related to this investment discipline.
One study demonstrated that the returns to a portfolio of securities will be more influenced the particular mix of investment classes than by any other single factor. Brinson, Hood, and Beebower showed that 94% of the variation of returns among institutional portfolios could be attributed to the asset allocation decision, while only 4% was attributable to individual security selection, and 2% to market timing decisions.
The important point in asset class selection is to choose asset classes that have low historical correlation to each other, meaning when one goes down, another will tend to go up. Or at least not go down as much as the first asset class.
With that in mind, we put a great deal of energy into constructing investment portfolios that are diverse in their asset class selection, with a keen eye toward class correlation.
SECURITY SELECTION
After we develop an appropriate asset allocation strategy, the next big question becomes, what securities should we buy?
There are plenty of choices. We use three disciplines when choosing the right assets.
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Active Management – While some argue that it is difficult or impossible to beat “the market,” we tend to challenge that conventional wisdom. In the real world we often see professional active investment managers who are able to achieve returns above their benchmarks for significant periods of time – three, five, ten years and more. Perhaps not every year, but often enough to create an impressive track record. Think of Warren Buffet, as an example. In any field of human endeavor, some people are just better than others. In sports, the arts, heart surgery, even dog training there are stand out performers. And in the case of investing, there are some folks who are just plain good at choosing securities. So part of our process is to identify and utilize these managers in our models.
Passive Investing – That’s not to say that we don’t ever use index funds and exchange traded funds. We do apply indexing to further diversify our portfolios. Indexing provides a simple and inexpensive way to achieve exposure to areas of the investment landscape. But if we have a choice between an index fund and an outstanding active manager, we tend to go with the outstanding manager.
Quantitative Investment Models – Where appropriate, we believe in employing quantitative investment strategies. Quantitative strategies seek to understand investment and market behavior by using complex mathematical and statistical modeling, measurement and research to replicate reality mathematically. These computer based market models use multiple factors to overweight desirable markets and underweight less desirable markets. These strategies have, over time, proven to reduce volatility and add consistency to portfolio returns.