How do you invest?

There are two fundamental ways to invest: by speculation or a market-based approach. Speculation is an attempt to try to beat the markets through buying what you believe to be the “right” investments and avoiding the “wrong” ones and by timing the market (getting in and out of the market at the “right” time). It’s possible to beat the market this way. The challenge is that speculative investing only beats the market a minority of the time. The annual Standard & Poor’s Index versus Active (SPIVA) report reveals how speculative mutual fund managers consistently underperform against standard measurements of success.

On the other hand, a market-based approach makes no attempt to speculate on winners and losers, as it instead aims to capture the market’s return. This strategy seeks to maximize diversification and to focus on keeping costs low in order to achieve greater potential returns.

While the conventional way of implementing a market-based approach is called “Indexing”, as it simply attempts to mirror basic market indexes like the S&P 500, we use a more strategic, flexible and precise approach often referred to as asset class investing.

Rather than follow an index, we divide the entire market into groups (or Asset Classes) with similar characteristics, like small company stocks, large company stocks and international bonds and attempt to capture the performance of that precise market segment. The companies included in a particular market segment change over time and an asset class is updated to reflect that in real time.

Maintaining this consistent exposure to constantly changing market segments is not easy for money managers to do. Therefore, we insist on partnering with portfolio managers with the expertise to provide tools that can maintain this precise market exposure in a way that is still low-cost and tax-efficient for clients.

Mutual funds are created around these market segments, with each having its own unique characteristics of risk and return. These funds are then combined into a portfolio in such a way that a rate of return can be maximized for a given level of risk. A risk level is determined for each client based on their financial goals and temperament, and an appropriate portfolio is agreed upon and selected accordingly.