Our Investment Philosophy

Portfolios are comprised of stocks and bonds. Historically, stocks (equities) are the asset class that offer the greatest possibility for long term reward, but they also reflect the greatest potential to deviate from an expected return. This deviation becomes particularly evident in periods of extreme market volatility. The appropriate inclusion of stock is the product of thorough discussion; however, we strongly recommend the development of a comprehensive financial plan to support any recommendation.

Our rules-based philosophy purposefully restricts each asset class to a minimum/maximum holding range designed to avoid adverse consequences of misguided market forecasting and advisor bias. Our portfolios are broadly diversified with range bound allocations to small, mid-sized and large U.S. companies. We also maintain limited exposure to international stocks and a tactical holding. When constructing portfolios, we believe investment style is an important consideration. Beyond the size of a company, style refers to a belief that the stocks held within an exchange traded fund (ETF), mutual fund or closed end fund are selected because of their high future earnings potential (known as growth stocks) or their comparatively low prices (known as value stocks). Individual stocks may be considered, but only if they align with our diversified philosophy.

There are several reasons we allocate capital to bonds: they can earn interest, are generally less volatile than stock, and may be sourced for liquidity when stocks are in decline. Thus, the greater the exposure to bonds, the less likely a portfolio is expected to deviate from an anticipated return. We monitor comments made by the Federal Reserve, interest rate movement, and global economic conditions to help determine bond quality, maturity, duration, and sector analysis.

Portfolios are continuously analyzed for any change in risk and return characteristics, overlapping stock positions, leverage, geographic exposure, concentrated sector concerns, and historical performance in various market conditions. Our decisions are guided by a wide array of research providers, professional organizations, publications, and analytical software. We rely on a variety of sources for market and financial planning perspectives including the American Association of Independent Investors, Schwab, Argus, Fact Set, CFP Board, CFRA, eMoney, the Financial Planning Association, Journal of Financial Planning, Morningstar, Riskalyze, Seeking Alpha, Thomson Reuters,  Barrons, Investment and Wealth Institute, YCharts and the Wall Street Journal. We continuously review information and white paper research made available to us by the Vanguard Group, Fidelity, Blackrock, Van Eck, First Eagle, American Funds, Franklin Templeton (ClearBridge Investments), and Fairlead.

Financial technologies continue to expand the breadth of investment selection. In the past many advisors relied solely on the inclusion of mutual funds as the best diversified path to both stocks and bonds. Stock selection inside a mutual fund is actively managed by individuals or teams, which often comes with a cost. When considering a mutual fund we evaluate internal expenses, performance, strategy, and benchmarking. A fund company must be open to speaking directly with us regarding attribution during periods of both outperformance and underperformance. Our research demonstrates that stock selection in certain asset classes such as international or small caps may justify the expense of active management. Cost concerns led us to evaluate ETFs, which are traded like individual stocks and similar to mutual funds in that they provide diversification, but typically at a lower expense. Simply investing in mimicked indices (such as the S&P 500 index) is known as a passive approach to investing. However, ETFs also offer a broad selection of market exposure and methodologies that select stocks through particular screening metrics. All ETFs require evaluation of operating expenses, share price, index methodology, stock selection factors, and trade volume.

Our research is represented in four distinct portfolios entitled preservation, conservative, moderate and aggressive. Preservation is considered in the context of having enough stock exposure intending to preserve purchasing power in the presence of inflation. Aggressive portfolios remain fully invested throughout all phases of market and economic cycles, however, there could be periods that exposure to stock could be less than 100%. This scenario becomes possible when we deploy the maximum 10% allocation to a tactical strategy which at times, could have allocations to bonds. For all other portfolios, exposure to stock will range 10% above or below their neutral weighting, including any stocks that may be held within a tactical position. For example, if one’s financial plan and risk tolerance identifies a 65% weighting to equities (our moderate portfolio), then exposure to stock would not drop below 58%, nor exceed 71%. Asset class weighting is based upon economic data, market conditions, and technical awareness of a multitude of market metrics.

Cost efficiencies in custodial trading platforms have enabled us to provide services to investors with less than $50,000. We also offer portfolios with economic, social, and governance objectives, if requested. Custom portfolios may be created for high net worth (HNW) investors that may include allocations to individual stocks, individual corporate and municipal bonds, and illiquid assets such as alternative investments.