OUR INVESTMENT PHILOSOPHY
Defining Risk: Each Goal Carries its Own Risk
The underlying principle of investment lies in the direct relationship between the potential return and risk taken. Before we create a portfolio, we assess your risk for each of your objectives.
The risk you are willing to assume for each goal is guided by three factors. One: the time horizon – goals with longer time frames can endure more market volatility. Two: the significance of the goal, like a child’s education vs. a resort home, affects your desired portfolio risk. Three: and, most importantly, your comfort with investing. For instance, stress about the market and sleepless nights are indicators to pull back on your risk level.
Asset Allocation: Most Important Element of Portfolio Creation
The importance of asset allocation has been well established. It is the primary factor in determining portfolio return – not market timing, not mutual fund choice, not stock selection. After properly defining objectives and risk tolerance, appropriate asset allocation is built with diversification among the various asset classes of stocks, bonds, and cash.
Portfolio Structure: Diversification with Discipline Enhances Return Potential - Lowering Risk
Stocks and bonds are further diversified into a multitude of asset classes, including domestic and foreign equity, domestic and foreign fixed income, emerging markets, REITS, and alternative investments. Since the various asset classes perform differently in different markets, diversification among the asset classes may enhance returns and reduces risk and volatility.
Classes are further divided into sub-asset classes; the sizes of the companies, investment style, and geographical location are examples of sub-asset classes. These sub-asset classes are again divided by investment styles including, fundamental, quantitative, diversified alpha, and more. Fixed income assets are similarly divided into a multitude of sub-asset classes.
Each asset class is characterized by return potential with an associated risk. To enhance potential returns at a given risk level, portfolio structure requires disciplined diversification among a multitude of asset classes for both fixed income and equity.
Multiple Specialist Money Managers: Potentially Enhance Returns and Lower Risk
Money managers who specialize in a particular area of the market grow in the experience necessary to perfect a specific investment style. These specialists know where to expect opportunity and what to avoid when the market isn’t favorable. These specialized managers may produce more consistent results than other managers who tend to move with the market.
Furthermore, multiple managers specializing in sub-classes complement each other further decreasing portfolio risk.
Continuous Portfolio Management: Ignoring Investments is not Optimum
The portfolios we manage benefit from multiple layers of monitoring. We remain vigilant as to the market and the changing economy and how our clients’ portfolios are performing. We utilize investment and research teams that oversee the money managers. Each money manager is reviewed regularly and replaced as considered necessary due to either the market or their performance. Each money manager in turn – with their teams of researchers and analysts – are continuously assessing and responding to the market in the buying and selling of individual securities.
Tax Management: Taxes Drain Capital
Taxes play an integral role in investments since after-tax return is your real return. For this reason we employ a special focus on tax-management to enhance after-tax returns. Our strategic approach includes the total portfolio taking advantage of tax-free bonds, tax-loss harvesting to offset capital gains, and maximizing long-term over short-term holdings. Our process regularly monitors holdings to lower taxes.