Our Investing Approach

EXPERIENCE AND WISDOM: Through a disciplined process of listening, analyzing, implementing and monitoring, we work with you to create a plan designed to help you achieve your unique financial vision. It all begins with a conversation. First (Step 1) we gather essential information about everything from your current assets and income to your specific financial objectives. Then we discuss your current situation, your financial goals and your vision for the future.

GUIDANCE: Next, we identify realistic expectations for investment returns suited to your risk tolerance. Then we create a plan (Step 2) recommending possible solutions to help you with your financial objectives and ultimately striving to assist you pursue your financial goals. This will be your guide for future actions and your source for benchmarks against which to monitor your progress and performance.

EFFICIENCY: Using the strategies presented in your plan, we will implement the solutions decided upon. (Step 3). This may seem like the end of the process, but it’s only the beginning.

SERVICE: We then monitor your portfolio periodically and can report on portfolio performance. We are also continually looking for opportunities to enhance your plan. We will aim to meet/talk at least once a year to discuss your progress, explore new ideas and make any necessary adjustments (Step 4).

CONFIDENCE: We provide all of this plus our promise to deliver the personalized service. We want your business, we appreciate the opportunity and trust that you place with us, and we strive to earn it every day!

Do keep in mind that all investing involves risk including loss of principal.  No strategy assures success or protects against loss.

Asset Allocation Explained

In one sense, asset allocation1 is quite simple. Invest in a mix of assets that have distinct characteristics and that respond differently to economic cycles, with a goal to minimize your portfolio’s overall volatility. Of course, there’s much more to it.

What seems like common sense today is based on a Nobel Prize-winning theory developed by Harry Markowitz over half a century ago. Dr. Markowitz published his landmark paper, ‘Portfolio Selection,’ in the Journal of Finance in 1952. Its publication marked the start of modern portfolio theory2.

Markowitz quantified risk for the first time by using a range of possible returns based on the variability of previous returns. He focused on the choice investors face between expected return and performance variance also known as standard deviation. This is based on the understanding that, generally, the higher the potential reward, the higher the risk of an investment.

Markowitz also shifted focus from the analysis of individual investments to the statistical relationships among the securities within an entire portfolio. He demonstrated how overall portfolio risk was affected, not just by the individual volatility of different assets, but also on the opposite movement of all assets. By selecting assets that had little correlation (one asset would rise while the other fell), Markowitz demonstrated how stocks that were risky individually could have their risk reduced within an efficient portfolio.

Markowitz charted an efficient frontier that offered an investor the highest expected return for any given level of risk, or the lowest level of risk for any given expected return. These ideas form the core of asset allocation.

Markowitz’s efficient portfolio isn’t easy to understand, especially in its full, detailed use of algorithms. But it is important and, with the help of computerized models, not hard to apply.

How important is asset allocation? Studies by Lipper have found that more than 90% of the variation in a portfolio’s returns is determined by how the portfolio’s assets are allocated among major asset classes: stocks, bonds and cash. Market timing and the selection of individual securities are not nearly as critical.

1 Asset allocation seeks to maximize the performance of your investment portfolio using diversification and disciplined investing.  However, using an asset allocation methodology does not guarantee greater, or more consistent returns, or against loss; rather it is a method used to manage risk.  your investment objectives, time horizon and risk tolerance will drive your asset allocation and help you determine the right balance for you.

2 Modern Portfolio Theory: Investors should keep in mind that there is no certainty that any investment or strategy will be profitable or successful in achieving investment objectives.

Source: Lipper

The potential for higher returns at a lower level of risk. If only it were that easy.

Asset allocation seeks to maximize the performance of your investment portfolio using diversification and disciplined investing. However, using an asset allocation methodology does not guarantee greater, or more consistent returns, or against loss; rather it is a method used to manage risk.  Your investment objectives, time horizon and risk tolerance will drive your asset allocation and help you determine the right balance for you.  Investments in foreign securities may be affected by currency fluctuations, differences in accounting standards and political instability.  These risks are more significant in emerging markets.  No strategy or theory can provide any certainly that any investment will be profitable or successful in achieving an investors investment objectives.

You may be able to gain over long periods of time if you can increase your level of investment returns without incurring undue risk. The power of compounding may make this possible.

To illustrate the impact of improving your average annual return by only 2% over a long period of time, look at how a portfolio of $50,000 grows over various time periods at 4%, 6% and 8% annual expected rates of return.

By maximizing your return for the level of risk you are comfortable with, you may be able to increase your retirement nest egg.


This is a hypothetical example of mathematical compounding and does not represent the performance of any specific investment product or class of investments. Rate of return will vary over time, particularly for long-term investments.  The values shown do not reflect product fees, charges or taxes which would reduce returns if included.  There are fees and expenses incurred with any investment program and investments held for long periods of time will fluctuate over time. Investments offering the potential for higher rates of return also involve a higher degree of risk. Actual results will vary.

The Importance of Asset Class Rebalancing

Configuring the proper mix of stocks, bonds, and cash to match an investor’s risk tolerance is an important step toward building and preserving wealth. Yet investors diminish much of the effect of an asset allocation policy if they fail to rebalance their portfolios periodically.

Due to the ups and downs of the market, the risk and return characteristics of an investment portfolio change over time. Consider an investor who started with a 60% equity and 40% fixed-income portfolio in 1991. Twenty years later, with no changes made to the portfolio, the mix would have shifted to 69% equities and only 30% fixed income due to stock market appreciation.  In our opinion that’s a more aggressive portfolio.



Frequency Growth Return
Monthly $ 49,559 8.37%
Semi-annually $ 49,824 8.40%
Annually $ 51,403 8.57%
Never $ 47,706 8.16%

This example is for illustrative purposes only. Past performance is no guarantee of future results.
Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index.


Source: InvestmentView. Uses total returns for S&P500 and Barclays Capital Aggregate Bond indices. Compound returns and annualized.

The Standard & Poors Composite Index of 500 stocks is generally considered representative of the U.S. stock market.  The Barclays Capital Aggregate Bond Index is an unmanaged index composed of securities from the Barclays Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index excluding publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. The performance of any index is not indicative of the performance of any particular investment.  individuals cannot invest directly in any index.  Past performance is no guarantee of future results.  Actual results will vary.

More interesting, however, is how the portfolio actually performed over the last 20 years (Jan. 1991-Dec. 2010). the static portfolio produced a smaller return than most rebalanced portfolios. If the investor had rebalanced periodically, he or she would have had greater returns and less risk and would have adhered to the original investment plan.

Because the risk-adjusted performance differences among the portfolios were small, the answer to the question of when to rebalance ( monthly, quarterly, semi-annually, or annually ) depends mainly on the cost to the investor of rebalancing. An investor’s 401(k) plan may allow him or her to rebalance without incurring redemption or trading fees on the funds in the program. If so, semi-annually rebalancing could give the investor a slight edge by holding the portfolio closer to the asset allocation policy. For the investor with holdings only in a regular taxable account and who must consider tax and fee implications, it may make the most sense to rebalance on an annual basis.