How will you create my investment strategy?
We recognize that each client’s needs and goals are different; subsequently client portfolio strategies and underlying investment vehicles will vary. Our firm and recommended third‐party investment managers may employ active, Core + Satellite and/or passive account management strategies. The following defines the common strategies utilized within a client’s portfolio.
Active Asset Management
A portfolio manager engaging in an active asset management strategy believes it is possible to create a profit from identifying or leveraging mispriced securities, or producing similar returns with less risk, or producing returns greater than a stated benchmark, such as a well‐known index. For example, a “large cap stock” fund manager might attempt to outperform the Standard & Poor’s 500 Index by purchasing underpriced stocks or derivative instruments representing these positions. At times, a portfolio manager may attempt to preserve capital during times of high risk through the use of cash and cash equivalents, and the percentage of account holdings invested in the market may vary substantially based on what is believed to be the prevailing risk in the market. For example, if a manager feels risk in the stock market is low, he might increase exposure to equities to attempt to take advantage of growth opportunities. When risk in the stock market is considered high, all of or a portion of the portfolio’s equity exposure may be moved to more stable short‐term fixed income instruments and cash equivalent alternatives in order to preserve capital.
Passive Account Management
Our passive strategy is based on Modern Portfolio Theory; selecting securities whose price movementshave historically low correlations to create efficient portfolios that offer the highest expected return for a given level of risk, or one with the lowest level of risk for a given expected return. This practice does not employ market timing or stock selection methods of investing but rather a long term, buy‐and‐hold strategy with periodic rebalancing of the account to maintain desired risk levels.
We will strive to create portfolios that contain investment vehicles that are diversified, tax‐efficient, andlow‐cost whenever practical; typically holdings are a broad range of mutual funds, ETFs and individual securities (e.g., stocks and bonds). For certain clients we may recommend master limited partnerships, real estate investment trusts, as well as certificates of deposit or other cash equivalents for non‐correlation and/or risk‐expression.