Our philosophy is grounded in the simple fact that while we do not control your rate of return, we do have some control over the amount of risk you take and the costs associated with managing your investments. Therefore, our primary focus is on diversification and minimizing investment fees associated within your portfolio.
Asset Allocation Strategy
Your written Personal Investment Strategy will outline your specific asset allocation strategy, including permissible asset classes and any special considerations. We believe in a balanced approach comprised of two major components: a growth portion and an income portion. The expected role of the growth portion will be to maximize the long-term appreciation of the portfolio’s assets, while the role of the income investments will be to generate current income, provide for more stable periodic returns, and provide some protection against a prolonged decline in market value of the portfolio’s growth investments. Tactically, we will work to keep your investment fees as low as possible, harvesting losses for tax purposes when applicable, and rebalancing when appropriate. We believe that if we can accomplish these things, then we can allow the power of compounding to work for you: interest on interest.
It is expected that the portfolio’s actual asset allocation will vary from its target allocation as a result of varying returns earned on the different assets and sub-asset categories. We will monitor the portfolio on a regular basis and make the necessary changes to rebalance to its normal allocation.
We recognize that the strategic allocation of the portfolio assets across broadly defined Income and Growth investments and within sub-categories with varying degrees of risk, return, and return correlation will be the most significant determinant of long-term investment returns and asset value stability. Diversification across and within asset classes is the primary means by which we expect the portfolio to avoid undue risk of large losses over long time periods. To protect the portfolio against unfavorable outcomes within an asset class, we will take reasonable precautions to avoid excessive investment concentrations. Read More...
Income vs Growth
We divide the investment world into four categories based on their unique characteristics (Income or Growth). We can own a specific investment by buying the stock or bond directly, or by buying an exchange traded fund (ETF) or a mutual fund investing in these securities.
Investments in this category include cash, certificates of deposit, and government, municipal and corporate bonds rated in the top four investment categories by Moody's and/or Standard & Poor's.
Investments in this category include non-investment grade bonds, preferred stocks, as well as foreign bonds. It also includes common stock in utility companies, Real Estate Investment Trusts and Master Limited Partnerships.
Investments include common stocks of domestic corporations of varying market capitalizations (large-cap, mid-cap, and small-cap). In this category, investors place their principal at risk in exchange for the possibility of higher returns than are generally available in the Income categories.
Investments in this category include stocks of more aggressive domestic companies and foreign corporations. Most investments in this category pay little if any dividends, and investment gains thereby are expected only from price appreciation, so volatility is generally higher than for investments in the Conservative Growth category.