Investment Philosophy

We believe successful investing in today’s world should be rooted in common sense and a fundamental comprehension of capitalism. We believe avoiding big losses is just as important as generating positive returns, and we focus on goals based portfolio construction that is designed to achieve returns that meet or exceed specific objective(s), while concurrently working to lessen risk.

In its application, our philosophy requires flexibility and a pro-active process that broadly considers changing economic fundamentals, socio-political considerations and the overall emotional disposition of retail investors – primary factors that drive the cyclical trajectory of capital markets. We scrutinize current data flow through top-down analyses in a perpetual effort to anticipate changes, adjust client portfolios accordingly and avoid the trappings of herd mentality.

We concur with decades of academic and empirical research that confirms the basic ratio of stocks, bonds and cash – known as Primary Asset Allocation - is the largest singular determinant of portfolio return over time. In our view, this represents the most important strategic investment policy decision and lays the foundation of our portfolio engineering process, specific to each clients’ goals, cash flow requirements and capacity to tolerate shorter-term volatility. We do not, however, dismiss the significance of tactical considerations on performance attribution, and we endeavor to sensibly link tactical posturing with forward-looking expectations through dynamic asset allocation¹ .

Our investment committee leverages a proprietary research system called S.T.S. (Smarte Tilting Strategy). Portfolio tilting (also known as under or over weighting) is the practice of exploiting undervalued (or overvalued) assets in the predictable mean reversion process. We evaluate a variety of anticipatory factors including, but not limited to sector rotation, business cycle patterns, and global leadership shifts to identify both opportunities and threats to portfolio capital. Within this comprehensive framework, we then select appropriate securities to complete implementation or adjustment activity. In this process, we may consider bottom-up analysis to capitalize on unique opportunities as they arise from time to time.

Client portfolios are reviewed on a daily basis, and we trade accounts as needed to realign portfolios with investment policy shifts and changes in our clients’ lives. Our research methodology utilizes the technological sophistication and emotional apathy offered in mechanized investment platforms. We also believe, however, there are essential advantages that only experienced human experts can (and should) provide to the paying client that go beyond plugging questionnaire responses into a computer algorithm.

Although robo advisors can provide a sensible and low-cost option for investors just starting out, they are generally inept at handling complex financial planning considerations, portfolio restrictions and other relevant issues outside the limited purview of the software. Data fed into robo advisor algorithms reflects information that has already happened, resulting in a purely reactionary trading scheme and potentially harmful automatic rebalancing. The dubious financial viability of robo advisors may also create a red flag for investors seeking a reliable long-term adviser relationship.

_{1 “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?” Roger G. Ibbotson and Paul D. Kaplan, Financial Analysts Journal, January/February 2000. “Determinants of Portfolio Performance,” Gary P. Brinson, L. Randolph Hood, and Gilbert P. Beebower, Financial Analysts Journal, July/August 1986. “Determinants of Portfolio Performance II,” Gary P. Brinson, Brian D. Singer, and Gilbert P. Beebower, Financial Analysts Journal, May/June 1991. “Asset Allocation Claims – Truth or Fiction?” Jennifer A. Nuttall and John Nuttall (unpublished) 1998. “The Importance of the Asset Allocation Decision,” Chris R. Hansel, D. Don Ezra, and John H. Ilkiw, Financial Analysts Journal, July/August 1991. “The Asset Allocation Hoax,” William W. Jahnke, Journal of Financial Planning, February 1997. “The Importance of Investment Policy,” Ronald Surz, Dale Stevens & Mark Wimer, The Journal of Investing, winter 1999. “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?: Authors’ Response,” Roger G. Ibbotson and Paul D. Kaplan, Financial Analysts Journal, May/June 2000.}

Disclosure: Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment loss. As with any investment strategy, there is the possibility of profitability as well as loss.