Investment Philosophy

We believe in rational and efficient investing. 

In the current investment landscape, there are limitless strategies. At their essence, they can be reduced to active investment or passive index investing. One end of the spectrum is subjective, expensive and doesn't work consistently enough to outweigh the costs; the other end is simplistic, reasonable and works fairly well. There is a third way, which we like to think of as “Rational and Efficient Investing” On the continuum between the extremes of active and passive, it is closer to the passive end, yet with execution efficiencies and knowledge of asset class behavior, this approach is superior to investing in commercially licensed index funds.  No market timing, no stock picking, no blindly buying or selling simply to reduce index tracking error. Our efforts are spent on matching your cash flow needs with the right allocation of asset classes to meet those needs under all market conditions. 

Markets work—take advantage of them

Most financial advisors and do-it-yourself investors continue to try to outsmart the market by trying to guess its movements. The facts show that up to 85 percent of actively managed funds underperformed versus the S&P Index over the past five years. Instead of trying to predict the unpredictable, capture market rates of return by investing in large numbers of stocks in selected asset classes resulting in portfolios with thousands of stocks.

Understand which risks are really worth taking

Research has shown that certain asset classes have a better risk/return relationship than others.  Markets worldwide have consistently demonstrated that stocks have higher expected returns than bonds, that small company stocks have a higher expected return than large company stocks, and that “value” stocks offer higher expected returns than “growth stocks.” The research shows that it makes sense to exclude certain stocks with heightened risk or inefficiencies such as illiquid securities or bankrupt companies.  

Take diversification seriously

Many investors think that they are diversified, but in reality their portfolio contains a lot of correlated investments. These are assets that move up and down in lock step. Achieve serious diversification by combining the right selection and mix of multiple asset classes, diversifying globally, investing in tens of thousands of equity securities and investing in high quality, short term fixed income.  Diversification does not guarantee a profit or protect against a loss, especially in a bear market, but if your portfolio's risk profile is appropriate for your situation, it is an effective way to reduce risk. 

Live on the Efficient Frontier

We use ‘pure' assets classes as the building blocks of your portfolio. Pure asset classes mean what they say. If the asset class is labeled large value, there is no chance of a mid-size growth company's stock being in the mix.  The pure equity asset classes hold more individual equity securities than the commercially licensed indexes funds.  The fixed income asset classes hold many of the bonds to maturity to minimize volatility. The asset class allocations are expertly engineered to reside on the “efficient frontier”, the optimal point along the return and risk tradeoff curve.  The portfolios are managed to minimize transaction costs and taxes. Although simple in theory, the execution is sophisticated and virtually impossible for “do it yourselfer” investors to replicate.   

The Basis of our Philosophy Is Upheld by Buffet and Bogle

“Together the cost penalty, the timing penalty, and the selection penalty consumed an amazing 73 percent of the profit available. Investors have paid a staggering price for the excessive costs and excessive marketing focus of the mutual fund industry.” 

John C. Bogle, Founder of Vanguard

“By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals.  Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb.”

Berkshire Hathaway Annual Report 1993 

Take control. Schedule a no-obligation discovery meeting today.

Make an appointment with our convenient online calendar.