Our Philosophy
SLOW AND STEADY WINS THE RACE, meaning tamping down volatility while utilizing diversity will get you there in the long run
Markets regress to the mean, meaning (no pun intended) one area of investing that does poorly for a while will probably be the one to do well again. It pays to be a CONTRARIAN
We must match who you are and where you want to go, to a plan with a matching portfolio strategy.
Time horizon must match investment goal and will affect type of investments chosen.
Redefine risk for time horizon. Historical rates of return per asset class and equity risk premium.
Can’t time the market
Hard to find anyone that can beat the market over the long term
Individual securities are not nearly as important as the different types of investing you are doing (asset classes). Asset allocation is like estate planning, we all have a plan whether we like it or not. However, some portion invested in individual stocks can work well for larger portfolios where the volatility can be mitigated by a longer holding period.
A stockbroker can barely know 15-20 stocks really well.
The goal is to get the client there, but not via a roller coaster. Undue volatility will deplete a portfolio.
Passive and Active investing can work together.
Risk changes from short term volatility to long term purchasing power as we invest for longer periods and we get older and live longer. As time periods go, the Short term is unknowable, the long term is inevitable. Don’t worry about being in the next 20% decline, worry about being out of the next 200% advance.
Diversification is not just to avoid putting all your eggs in one basket or different mutual fund objectives but across size, geography, businesses, asset classes and value and growth investing. Therefore, usually up to one quarter each of a portfolio will include international and small/mid size stocks.
The diversification effect is based on correlations within a portfolio and can mean more return with the same amount of risk or less risk with the same amount of return. Some should be working while others should not.
A traditional portfolio has much fewer chances of long term success than a broadly diversified portfolio
If you have a long time horizon, invest in equities on any day of the week that ends in a ‘Y’
Must inform investors of the interest rate risk and purchasing power risk of bonds. Think about the price of postage stamps or gasoline. We can’t let investors mortgage the future to pay for the present. Markets are volatile but retirement is certain. Volatility is why we get the return we get.
If outside investment managers are used, we want to avoid managers that style drift and change their philosophy for what’s in favor, and push for short term performance numbers
If outside investment managers are used, we want to find managers that charge low fees as well as a tenure longer than 3 years. We want to talk with them and find out what they are going to do and if they’re doing what they said they would do.
If outside investment managers are used, we want to monitor managers cash positions, their concentration into one security or sector, their fees, the risk they’re taking for the return they’re getting.
We believe in the semi-strong efficient market theory that most information is known and prices reflect this but there are areas of anomalies where some advantage can be achieved.
If possible, when still investing or contributing, use the Power of dollar cost averaging