Our firm was created on the basis of several fundamental concepts that we refer to as the ‘We Believe’s, and three of these statements are related to investment management as follows:
- That Short-Term Market Volatility Should Be Properly Understood Before Long-Term Investing Can Begin.
- That Low-Cost Investments Are The Best Way To Keep More Of What You Earn.
- That After-Tax Returns Should Be The Focus Instead Of Trying To 'Out Smart' The Market.
Our financial planning process includes gathering details about your current situation, your financial goals, risk tolerance, time horizon and other relevant factors. We can then determine appropriate strategies and recommendations including an investment asset allocation for each client. The allocation is the mix of different investments that we feel is appropriate, for example, 70% stocks and 30% bonds is one such target asset allocation.
The stock and bond allocations are broken down further into sub-asset allocations, in order to obtain additional diversification. Examples of these categories include portions of large, medium and small sized companies.
There is (and always will be) some debate over which style of stock investing is best – active or passive – and as noted above, it is our belief that low-cost investments should be prioritized which leads us to prefer passive management. We also follow the philosophy that risk reduction can be achieved through the broad diversification found in mutual funds and ETFs, instead of trading individual stocks.
Once a suitable allocation for the long-term is determined, we focus our attention on keeping portfolios in the proper mix through constant monitoring and rebalancing. For example, if a 70% stock and 30% bond target allocation moved to 67% stocks and 33% bonds after a stock market decline, rebalancing would involve selling the extra 3% now in bonds and buying 3% more in stocks. The market is continuously going up and down, so why not capitalize on that by buying low and selling high!
The final technique is to aim to maximize after-tax returns through Income Tax Planning - which is all about trying to pay taxes when the rate is the lowest – not merely trying to avoid paying any taxes. By merging investment strategies with tax planning, we can uncover opportunities such as realizing capital gains when tax brackets are low or harvesting capital losses when tax brackets are high, just to name a few!
We use Betterment for Advisers (an independent and unaffiliated firm) as the custodian for clients who are receiving our ongoing professional portfolio management. We implement our own proprietary research and investment strategies, while leveraging Betterment's digital onboarding and tax-efficient rebalancing technology. A perfect combination of personal touch and high-tech!