Investment Philosophy

Rather than relying on shifting trends or fleeting emotions, our disciplined approach captures market returns in each of the important asset classes of a well-diversified investment portfolio.

Our investment approach is based on the philosophy:

  • Investors inherently avoid risk – Investors are often more concerned with risk than reward. Our portfolios are designed to address each client’s risk profile.
  • Security markets are efficient and incorporate all publicly available information– The “Efficient Market Hypothesis” states that prices accurately and quickly reflect values and information . This implies that active fund managers cannot expect to consistently beat the market by picking individual securities or by “timing the market.” Academic studies show that professional investment managers do not achieve better risk-adjusted returns than the market as a whole. This is primarily due to the expenses and taxes incurred with active management.
  • The Three-Factor Equity Model– Expected returns in the equity markets can be summarized using three factors:
    1. Exposure to the overall market.
    2. Small company stocks have higher expected returns than large company stocks.
    3. Low-priced “value” stocks have higher expected returns than higher-priced “growth” stocks. Many economists believe small cap and value stocks outperform because the market rationally discounts their prices to reflect underlying risk. The lower prices give investors greater upside as compensation for bearing this risk.
  • The Two-Factor Fixed Income Model– Fixed income return scan be summarized using two factors:
    1. Longer-term investments are riskier than shorter-term investments.
    2. Instruments of lower credit quality are riskier than instruments of higher credit quality. We use shorter-term, high-quality fixed income as a strategy to reduce risk while maximizing the overall portfolio.
  • Diversification – Diversification is the most essential tool available to our investors. It enables us to capture broad market forces while reducing the excess, uncompensated risk arising in individual stocks.
  • Institutional Investing – Investing using tax-efficient index funds, Exchange Traded Funds (ETFs), and Dimensional Fund Advisors (DFA) funds results in lower taxes and investment costs.

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