Keeping in mind a long-term perspective
Our approach to investing is grounded on the premise that one cannot predict the timing, volume, direction, and price changes for specific investments or asset classes. Given the random nature of the markets, we rely upon the academic and evidence-based foundation provided by Modern Portfolio Theory (“MPT”) to minimize portfolio risk for a targeted rate of return.
MPT seeks to minimize volatility by assembling a portfolio of investment asset classes in various percentages that are mathematically correlated so that the upward movements of one category offsets the downward movements of another.
We then implement the resulting asset allocation strategies by using a combination of no-load index or passively managed mutual funds.
While MPT and asset allocation is generally considered an effective and efficient method of managing risk, it does not eliminate portfolio volatility nor does it guarantee that the targeted rate of return will be achieved. The specific investment strategy and asset allocation for any given client is based upon the objectives, findings, and recommendations resulting from the client consultation process. The client may change these objectives at any time.
Listed below are 6 key principles for successful long-term portfolio management.
- Manage investment risk with broadly diversified investments
- Use strategic asset allocation to develop an efficient portfolio that minimizes volatility for a targeted rate of return
- Systematically rebalance the portfolio to take advantage of the market’s natural ups and downs
- Keep fees and expenses low to minimize the impact of fees on performance
- Avoid large losses in bad times so you don’t have to be as aggressive in good times
- Don’t react emotionally with fear or greed to market events or newspaper headlines