Portfolio Management

1. Investment Risk

Our approach to investing combines more than eight decades of market data, Nobel Prize-winning academic research and the latest discoveries in behavioral finance. The main objective is reducing investment risk through diversification, which we call asset allocation. We consider risk to be another word for volatility, the likelihood of a given investment fluctuating in value from year to year. Diversification is intended to reduce volatility.

To achieve diversification that reduces risk, we recommend allocating assets among the major classes of stocks, bonds, and real estate (and to a limited degree, cash, commodities and other alternative investments). Stocks are further divided between U.S. and foreign, large and small companies, and growth and value styles. In addition, we exercise care to minimize income taxes and investments' expenses so that more of what is earned is retained in the account.

The building blocks of our portfolios are the institutional caliber of mutual funds offered by Dimensional Fund Advisors (DFA). We prefer DFA funds for their low internal expenses, low turnover (resulting in tax efficiency and further reducing cost) and other advantages over retail mutual funds and ETF's. However, in situations when our preferred mutual funds are not available such as in employer-sponsored retirement plans, we will make recommendations from the specific choices that are available. Furthermore, we are able to fully customize clients' portfolios as merited by other considerations, such as when clients are holding low cost basis securities that should be sold gradually so as to minimize capital gains tax.

For more detailed information on our approach to constructing and managing portfolios, please download our White Paper “8 Threats to Portfolio Performance”.

2. Behavior Risk

We are committed to being your financial “conscience” so that you don’t let your emotions compromise the integrity of your portfolio and your financial future. We all experience the emotions of fear and greed when dealing with our finances, but these are not our allies!

Rather than attempting to “time the market”, we follow the discipline of "staying the course" through both the ups and downs of the financial markets (studies show, even in a declining market, it is risky to engage in "timing", as an investor who has stepped out of the market is likely to miss the opportunity to reenter in time to participate in the rebound).

3. Longevity Risk

With many of us now spending three or more decades in retirement, we focus on ensuring that you do not outlive your assets. Our outmoded system of federal social security was not designed with this modern reality in mind! We also address and help you manage the risk that this increased longevity could entail the need for long term care, and budgeting for health care costs that will likely not be fully covered by private health insurance or Medicare.