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Our Investing Approach

EXPERIENCE AND WISDOM: Through a disciplined process of listening, analyzing, implementing and monitoring, we work with you to create a plan designed to help you pursue your unique financial vision. It all begins with a conversation. First we gather essential information (Step 1) about everything from your current assets and income to your specific financial objectives. Then we discuss your current situation, your financial goals and your vision for the future.

 

GUIDANCE: Next, we identify realistic expectations for investment returns suited to your risk tolerance. Then we create a plan (Step 2) recommending possible strategies to help you with your financial objectives and ultimately striving to assist you pursue your financial goals. This will be your guide for future actions and your source for benchmarks against which to monitor your progress and performance.

 

EFFICIENCY: Using the strategies presented in your plan, we will implement the solutions decided upon (Step 3). This may seem like the end of the process, but it’s only the beginning.

 

SERVICE: We then monitor your portfolio periodically and report on portfolio performance. We are also continually looking for opportunities to enhance your plan. We will aim to meet/talk at least once a year to discuss your progress, explore new ideas and make any necessary adjustments (Step 4).

 

CONFIDENCE: We provide all of this plus our promise to deliver a personalized service. We want your business, we appreciate the opportunity and trust that you place with us, and we strive to earn it every day!

 

Do keep in mind that all investing involves risk including loss of principal.  No strategy assures success or protects against loss.

Asset Allocation Explained

In one sense, asset allocation1 is quite simple. Invest in a mix of assets that have distinct characteristics and that respond differently to economic cycles, with a goal to minimize your portfolio’s overall volatility. Of course, there’s much more to it.


What seems like common sense today is based on a Nobel Prize-winning theory developed by Harry Markowitz over half a century ago. Dr. Markowitz published his landmark paper, ‘Portfolio Selection,’ in the Journal of Finance in 1952. Its publication marked the start of modern portfolio theory2.


Markowitz quantified risk for the first time by using a range of possible returns based on the variability of previous returns. He focused on the Efficient Frontier imagechoice investors face between expected return and performance variance also known as standard deviation. This is based on the understanding that, generally, the higher the potential reward, the higher the risk of an investment.


Markowitz also shifted focus from the analysis of individual investments to the statistical relationships among the securities within an entire portfolio. He demonstrated how overall portfolio risk was affected, not just by the individual volatility of different assets, but also on the opposite movement of all assets. By selecting assets that had little correlation (one asset would rise while the other fell), Markowitz demonstrated how stocks that were risky individually could have their risk reduced within an efficient portfolio.


Markowitz’s efficient portfolio isn’t easy to understand, especially in its full, detailed use of algorithms. But it is important and, with the help of computerized models, not hard to apply.

How important is asset allocation? Studies by Lipper have found that more than 90% of the variation in a portfolio’s returns is determined by how the portfolio’s assets are allocated among major asset classes: stocks, bonds and cash. Market timing and the selection of individual securities are not nearly as critical.

1 Asset allocation seeks to maximize the performance of your investment portfolio using diversification and disciplined investing.  However, using an asset allocation methodology does not guarantee greater, or more consistent returns, or against loss; rather it is a method used to manage risk.  your investment objectives, time horizon and risk tolerance will drive your asset allocation and help you determine the right balance for you.

 

2 Modern Portfolio Theory: Investors should keep in mind that there is no certainty that any investment or strategy will be profitable or successful in achieving investment objectives.

 

Asset allocation does not ensure a profit or protect against a loss.

 

Source: Lipper

Asset Allocation

Asset allocation seeks to maximize the performance of your investment portfolio using diversification and disciplined investing. However, using an asset allocation methodology does not guarantee greater, or more consistent returns, or against loss; rather it is a method used to manage risk.  Your investment objectives, time horizon and risk tolerance will drive your asset allocation and help you determine the right balance for you.  

 

Investments in foreign securities may be Asset Allocation Imageaffected by currency fluctuations, differences in accounting standards and/or political instability.  These risks are more significant in emerging markets.  No strategy or theory can provide any certainly that any investment will be profitable or successful in achieving an investors investment objectives.  You may be able to gain over long periods of time if you can increase your level of investment returns without incurring undue risk. The power of compounding may make this possible.

 

To illustrate the impact of improving your average annual return by only 2% over a long period of time, look at how a portfolio of $50,000 grows over various time periods at 4%, 6% and 8% annual expected rates of return.

 

By maximizing your return for the level of risk you are comfortable with, you may be able to increase your retirement nest egg.