A sound investment strategy serves as the foundation for a well-constructed financial plan.
Each client's situation is unique so it's important that we take the time to listen to you and fully understand your financial goals. Equally important is assessing your comfort and tolerance for risk. It's after these in-depth conversations that we begin constructing an investment portfolio to help you meet your goals.
Visit our FAQs to learn more about our investment process.
We typically employ a long-term, strategic investment strategy. We utilize academic and market research when creating portfolios and incorporate index, factor, and actively managed funds to help you achieve your investment objectives. We believe that:
We utilize and employ model portfolios but are mindful of a client's current investment positions and preferences. If a client has a low-cost legacy position, we do not blindly sell the position and create a big tax hit. We analyze options and incorporate the position in the portfolio and maybe sell the position over time. Likewise, many clients may have inherited stock or stock from a previous employer they want to keep, and we will work those positions into their portfolios. We can incorporate these situations and positions in client portfolios but always review with clients the investment and risk impact of individual positions and how they may affect their financial goals.
It's for this reason that we invest primarily in entire "markets" using mutual funds and exchange-traded funds (ETFs). By investing in whole stock markets, clients get exposure to a wide variety of companies, industries, and sectors, as well as both fast growing and steady earning companies. We utilize index funds when appropriate for low-cost, tax-efficient, broad stock market exposure.
Factor investing involves rules-based methodologies targeting specific drivers of return for stocks. For example, a traditional index will weight companies based on their market size regardless of the underlying fundamentals of the company. A "quality" factor investment will weight investments in companies based on the quality of their earnings. Therefore, a quality factor investment fund will tend to have higher weightings in companies with stronger balance sheets, higher returns on equity and consistently higher predictable profitability. For a real-world example, if a traditional oil company has the same market size as a fast growing technology company, the index fund will invest equally in both. But the quality factor fund will invest more in the company that has higher quality earnings as defined by their methodology.
Our preference is to utilize a mix of actively managed bond funds and index funds. Actively managed bond funds allow bond managers the flexibility to make changes to the underlying investments depending on the current market environment, whereas index funds (tracking the overall U.S. bond market, for example) generally provide stability for the portfolio. For some clients, we also invest in individual municipal and corporate bonds or maturity date ETFs.
We utilize low-cost and tax-efficient investments whenever possible. Higher cost investments as well as inefficient taxable investments can be a drag on investment performance and after-tax returns. We identify the market exposure we want and then seek out the lowest-cost, most tax-efficient investment for client's portfolios that satisfies our exposure criteria.
We also utilize asset location when possible which is the process of locating investments in certain accounts for tax-efficiency. For example, we may place high-interest paying investments in tax-deferred or tax-free accounts and locate stock investments in taxable accounts. The interest paying accounts avoid current taxation and the stock funds tend to have lower taxable distributions.
Concentrations in individual stocks, industries, and sectors, can increase the risk of a portfolio. We believe diversification can reduce risk and volatility giving clients the best opportunity to reach their financial goals. For diversification, we invest broadly, in both US and international markets and across different asset classes (stocks, bonds, cash, etc.).