INVESTMENT PHILOSOPHY
Our Investment philosophy can be summed up in a single phrase: Focus on the things you can control, not the things you can't control.
Unlike stock pickers who devote their efforts to trying to outguess the market we focus on Three Key Concepts for Investment Success:
Concept One: Maximize Cost Efficiency There are some very simple strategies that can significantly improve the cost efficiency of the investment portfolio, thereby increasing net returns in the process. The first way to maximize cost efficiency is by using institutional, asset-class funds. There are four major attributes that make asset-class funds so attractive. They have lower operating expenses, lower turnover which results in lower cost, lower turnover which results in lower taxes, and they consistently maintain market segments. The second way to maximize cost efficiency is by focusing on asset location which is the strategic division of assets across an investor's accounts based on those assets' tax liability. There have been several studies that show investors can lose up to 20% of their after-tax return by misallocating investments in the wrong type of account.
Concept Two: Minimize Unnecessary Volatility All stock investors have to live with a certain amount of volatility but you can structure your portfolio so that it doesn't experience unnecessary volatility. We use Modern Portfolio Theory (MPT) to accomplish this. MPT won a Nobel Prize in Economic Science for its efforts in this area. According to MPT, asset classes and investment styles (such as growth and value, large and small, foreign and domestic, etc.) would be combined in a portfolio with an understanding of the effect those asset classes have on each other, not just evaluated on their own. Over the long term, MPT reduces the extreme volatility that comes from being concentrated in just a few stocks or market sectors and this will increase your compound returns over time compared to less efficiently designed portfolios.
Concept Three: Manage the Portfolio Proactively We embrace the concept of "buy-and-hold" but we definitely do not embrace the concept of "buy-and-forget-about-it". While we avoid making subjective decisions about the near-term direction of the stock market, we go to great lengths to manage your portfolio and monitor the investments within in. Our efforts in this area include rebalancing and reallocation. Rebalancing is the process of reallocating assets back to their predetermined target weightings. The primary purpose of this is to maintain the structural integrity of the portfolio to deliver a more consistent and predictable investment experience. We understand that capital markets are a dynamic environment that do not stay static. For this reason we monitor the global capital markets to see if new asset classes are emerging that may add a diversification benefit to our portfolio strategies. We conduct rigorous analyses of new asset class opportunities and, when appropriate, we add them to our portfolio strategies.