Investment Strategies – Proper Wealth Management

Whether you have an investment philosophy or not, clients look to us for guidance to ensure their portfolio aligns with their goals and risk tolerance. We tailor each client’s investment strategy because everyone is different and there’s no one size fits all approach. We believe diversification is the cornerstone of investment success and employ passive (strategic) and active strategies on behalf of clients.

Strategic Stocks & Bonds

Our strategic stock and bond strategies is our answer to long term quasi-passive portfolios. When we say active, what we mean is a manager attempting to do better than an index that they track. In some indices, being active is more difficult than others. For instance, it is incredibly difficult to be an active large cap US manager and beat the market consistently while it is much easier to add return over the index in emerging markets and international stocks.

In fixed income, we prefer not to invest with bond managers that track a corporate bond or high yield bond index since we believe the construction of those indices are done counterintuitively. To further explain, most corporate bond indices largest weightings are companies with the highest debt burden. This is why we prefer a bond manager that can deviate widely from the index since we rarely want to own the most indebted companies in the world, whether they’re investment grade or high yield.

Read About The Next Decade Here

Tactical Investing

Factors are the foundation of investing—broad, persistent drivers of returns across asset classes. Our role is to understand how factors work to better capture potential for excess return and reduced risk, just as leading investors have done for decades. At a high level, these factors (and strategies) focus on credit spreads, momentum, quality (return on equity, earnings variability and debt-to-equity), seasonal rotation factors, price reversals and free cash flow.

Alternative Investments

Alternative investments are ones we characterize as non-public market strategies. They tend to be less liquid and offer a higher return potential than public market investments. Some of the investments we’ve made on behalf of clients into alternative investments are:

Multi-family real estate
Commercial real estate
Hedge Funds
Private debt/loans
Private Equity
Venture Capital
Private Companies

We believe the following factors are critical to investment success:

Understanding Risk

We have a mission, job and a duty to execute that mission on behalf of clients. While we take risks, we do everything we can to mitigate them. To accomplish this, we utilize technology that helps pinpoint our clients acceptable level of risk (AKA volatility) in the form of a number from 1-99. We commonly refer to this number as your speed limit. If a clients speed limit is 80, we only drive this fast when optimal conditions are present. The speed of the portfolio is dictated by market conditions, valuations, macro-economic data, volatility, volume and a variety of other factors. The way we view risk tolerance and portfolio construction is thereby dynamic and a key differentiator compared to other wealth management and brokerage firms.

Asset allocation

Asset allocation together accounts for 100% or more of diversified portfolio returns due to the negative effects of transaction costs and tax consequences for market timing. What asset classes you own (or don’t own) and in what percentage relative to one another will determine your investment returns each year.

Taxes

Column example
Years	Tax Efficient	35% Tax on Annual Gain
1	1000	1000
2	2000	1650.00
3	4000.00	2722.50
4	8000.00	4492.13
5	16000.00	7412.01
6	32000.00	12229.81
7	64000.00	20179.19
8	128000.00	33295.66
9	256000.00	54937.84

This chart shows why being tax efficient is a must not a should. We believe it’s not just what you earn, it’s what you get to keep that matters. We employ a variety of tactics to help reduce the tax burden from our investment strategies.

Emotional decisions

Numerous studies have been conducted on investor behavior and one of the most agreed upon mistakes that most people make is acting irrationally and emotionally at times which are historically the worst. Meaning, most investors are buying at market peaks and selling at market lows. By maintaining a consistent approach, we are able to avoid this common mistake that keeps a lot of investors from earning reasonable returns.

Rebalancing

By rebalancing, you can reduce the risk within your portfolio that inevitable grows over time. If you start with a portfolio of 50% stocks and 50% bonds, in 5 years time your stock portfolio may have grown to be over 80% of your portfolio. The risk in a portfolio of 80% stocks is different from a portfolio with only 50% stocks.

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Fees

Most investors are unaware of the fees they are paying to their advisors as well as to the underlying investments such as mutual funds, ETF’s, etc. We provide transparency so our clients know what they’re paying at all times.