Put away the crystal ball. You don’t need it.
Our investment philosophy is based on extensive research, which shows that investors are best served by a low-cost, evidence-based investment strategy. Great, but what does “low-cost” mean!? It’s pretty simple - if there are two investments with identical risk and return characteristics, we’d prefer to own the one that has lower fees. That way you keep more of your money at the end of the day and pay less in fees.
The “evidence-based” part ensures we don’t invest according to our whims or feelings. Instead, we choose investments with characteristics that have outperformed the market historically. Having a systematic approach to investing eliminates the need to be a stock picker, which is great because it doesn’t work! Ironically, the world’s most famous stock picker, Warren Buffett, agrees with our philosophy.
It’s important to make sure your portfolios remain close to our target allocation. As the price of investments change, we rebalance your portfolio to make sure you remain invested within a range of your optimal portfolio allocation. We use technology to look for rebalancing opportunities daily, across all of your portfolios.
We expect market returns to be positive over long periods of time. In the short-run, however, some positions may temporarily be in a loss position. If these securities are held in taxable accounts, we’ll look for tax-loss harvesting opportunities, which can shield your portfolio from taxes and increase your effective portfolio return.
If you’re saving for retirement, it’s likely you’re using multiple accounts (401k, Traditional or Roth IRA, or a taxable account) to save for retirement. Each of these accounts has unique tax advantages, which instructs how we’ll build the portfolio. We’ll choose to hold certain securities in each account depending on the tax advantage of each account and each asset’s individual characteristics. Confusing? Yeah, we know but the payoff is a higher after-tax return for your portfolio!
Optimal portfolio construction finds the balance between risk and return for each of your goals. It’s common for our clients to have both an aggressive portfolio for retirement as well as conservative portfolio(s) for their short-term goals.
We construct portfolios using exchange-traded funds (ETFs). These are funds that track a specific index and trade on a market exchange like stocks or bonds. Buying one of these ETFs gives an investor instant access to hundreds or thousands of underlying securities. It’s a really efficient way to diversify a portfolio! Also, there are tax advantages to using ETFs over mutual funds (ask us about this if you’re interested). Each ETF we use is generally low-cost and highly liquid - meaning it’s total cost to you is low and there are many buyers and sellers in the market.
There are unique characteristics about our portfolio that we believe give it an advantage above and beyond a purely passive, index portfolio. The stock portion of our portfolio is tilted slightly towards value (companies that are cheap relative to assets or earnings) and small-cap (companies with a lower market capitalization) stocks. You’ll notice we hold a substantial international component in our portfolios, ensuring your portfolio benefits from investments in foreign developed and emerging market countries. The bond positions in the portfolio attempt to balance the returns of each asset class against the risks associated with interest rates, credit, and geopolitical risk.