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Investment Management Philosophy

Our approach to investing can be described as well diversified, conservative and patient.  We believe that it is more important to control losses than to reach for extraordinary gains in the management of our clients assets.  There are many get rich quick schemes being marketed every day by a wide variety of well intentioned, and sometimes, not so well intentioned individuals and firms.  We avoid such investments, as most, carry the risk of large, if not, total loss of capital.  We do not view such “opportunities” as investing, we view them as speculating and we are not in that business.

We personally invest in many of the same securities we manage for our clients.  We are just as interested in the success of these investments as you are.  Our financial futures and compensation are directly tied to their success. In short, we eat our own cooking.

The time-tested portfolio management strategies we employ are described below.

Asset Allocation

The asset allocation decision is one of the most important factors in determining both the return and the risk of an investment portfolio. Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. Every asset class has distinct characteristics and may perform differently in response to market changes. Therefore, careful consideration must be given to determine which assets you should hold and the amount you should allocate to each asset. Factors that greatly influence the asset allocation decision are your financial needs and goals, the length of your investment horizon, and your attitude toward risk. The effect of asset allocation far exceeds the effects of both market timing and security selection, demonstrating that the asset allocation decision is the most important determinant of portfolio performance. We employ 5 individual investment models.  These models offer different Target Allocations.  These Target Allocations are coordinated with each client’s Risk Tolerance. 

Diversifying your portfolio makes you less dependent on the performance of any single asset class. Effective diversification requires combining assets that behave differently when held during changing economic or market conditions. Moreover, investing in assets that have dissimilar return behavior may insulate your portfolio from major downswings.

Reinvesting and Rebalancing

The key to enhancing returns is the reinvestment of income. Returns decline dramatically if dividends or coupon payments are consumed rather than reinvested. Reinvesting your income enables you to take advantage of compounding. With compounding, you earn income on the principal in addition to the reinvested dividends and coupon payments.

Because asset classes grow at different rates of return, it is necessary to periodically rebalance a portfolio to maintain a target asset mix. A portfolio that is not rebalanced periodically may become more volatile (riskier) over time. This strategy forces the investor to sell portions assets that have gotten ahead of themselves and buy assets that are undervalued.  Buy low and sell high is how you make money.

Tax-Loss Harvesting

Selling losers to reinvest funds in investments that are similar in style may allow investors to maintain their long-term asset allocation and enjoy the benefits of a potentially lower tax bill. Although long-term investors know that it is better to buy-and-hold than to try timing the market, there are times when selling and taking losses may be worthwhile. For example, an investor enjoys a taxable gain of $5,000 from an investment and suffers a loss of $3,000 from another investment. If the investor did not sell the loser, the tax liability on the gain of $5,000 would be $750. If the loser was sold, the investment loss of $3,000 would lower the taxable gain to $2,000, thereby reducing the tax liability from $750 to $300. This strategy can help investors lower their tax bill while still sticking to their asset allocation policy.