Investment Philosophy

First and foremost, to be a successful investor requires a certain level of optimism.  We believe the future will be better than current or past events.

A key component to your financial plan and reaching your goals is knowing the investment philosophy you will abide by during good markets and down markets.  As important is agreeing to this philosophy prior to investing and sticking with it.  We do our best below to lay out our philosophy in hopes it will guide our time together.

  1. Time in the Market > Timing the Market.  - There’s always a reason to pull your money out of the market or wait to invest,   but history shows investing with conviction and staying invested in your strategy benefits investors.

• ⁃ Michael Batnick’s chart

2. Control what you can control!

  1. Fees - Fees are charged a several ways and understanding what fees you are paying and the tradeoffs is really important.

    • Fund Expense Ratio: The expense ratio measures how much of a fund's assets are used for administrative and other operating expenses. For investors, the expense ratio is deducted from the fund's gross return and paid to the fund manager.  You can read Further here.

    • Transaction Fees:  Simply put, “does it cost money to buy or sell an investment?”  Many brokerages have reduced gotten rid of transaction fees  but be mindful of how your account is structured.  If the strategy calls for a lot of trading the fees can add up.

    • Investment Management Services:  This is the fee you pay to the advisor.

  2. Taxes- Taxes play a significant role in your investment success.  We outline a few scenarios below we pay attention to.

    • Capital Gains v Losses-  When you purchase an investment in a taxable account you establish your cost basis.  When you sell that investment you either realize a gain or a loss.  Depending on the length of time you held the investment, you will be responsible for Short Term Gain or a Long Term Gain.  We look for opportunities as we manage your portfolio to take advantage of both up markets and down markets.

  3. Behavior

    • Fear and greed are opposite emotions but can have a detrimental impact on the well being of your investments.  Inventorying your biases, emotions and closely held beliefs can help investors stay invested

  4. Liquidity is more important than you think.

    1. We review with each client their target cash position and work to maintain that proper balance.  This ensures they have adequate cash to meet short term needs and aren’t holding too much cash which could keep them from reaching longer term goals.

  5. Every asset has a job.  -Whether its the assets in investment accounts, closely held businesses, real estate or cash each position plays a role in a the financial planning process.  We work to name each asset and identify proper expectations for those assets.  We map these assets out in RightCaptial and inventory them regularly.

  6. Diversification Works.  -  We’ve seen many different market cycles even in the recent past and the theme that emerges is having a properly diversified portfolio reduces the amount of changes, expenses and exposes investors to many different asset classes.  As money moves in and out of different asset classes we want to be positioned to take advantage of different market cycles.

• 5. Take the long view! - We believe this is the most important component to our philosophy.  I sign off on emails, memos and conversations with this phrase.  Over time markets reward investors who allow their investments to stay invested over 5+ years.  The Chart below illustrates the volatility experienced in shorter increments all the way out to longer time horizons.   Volatility historically smoothes out the longer the holding period.