We believe that the best way to achieve long-term investment goals is to build and maintain a globally diversified portfolio of low-cost index funds and exchange-traded funds with a level of risk appropriate for your personal situation.
Four main factors drive investor success: diversification, asset allocation, expenses and taxes. Nobody can control the financial markets, so investors should concentrate on the things they can control. An investor can determine the allocation of the portfolio and minimize the performance drag of expenses and taxes by choosing the lowest-cost and most tax-efficient funds.
Diversification is the cornerstone of any successful investment plan. By using a combination of different types of investments, an investor can reduce the volatility (risk) of their portfolio without sacrificing performance. To achieve proper diversification we employ a technique called asset allocation, which is the process of dividing a portfolio into major asset classes and sub-classes to arrive at a mix best suited to achieve the desired combination of risk and return. Numerous studies have shown that portfolio performance is based mostly on the asset allocation decision.
Selecting the best investments to represent each target area is also important, especially in regards to minimizing expenses and taxes. The portfolios we recommend are comprised mainly of index funds and exchange-traded funds. A low-cost index fund or ETF will likely to beat over 80% of actively managed funds with the same benchmark target over an extended period of time.
Putting just a few of these funds together in a portfolio allows you to own the entire stock, bond and real estate markets. This market-matching strategy allows an investor to share in the growth in the capital markets over time.
The best way to design and implement the portfolio is to do it yourself with the assistance of an hourly-based advisor rather than using commission-based products or a full-time money manager. With the index funds and ETFs available today, individuals have an advantage over financial professionals. We help you implement a self-directed portfolio so that you enjoy worry-free and effortless investing.
Keep in mind that the future is uncertain; therefore, portfolios should have sufficient liquidity and flexibility to deal with changes that may occur. For this reason we do not like products or accounts with penalties that prevent or inhibit you from making changes as needed. Our goal-based philosophy also leads us to avoid speculative investments or seeking short-term gains.
In summary, our philosophy and self-directed portfolio management methodology offers a superior way to invest for the following reasons.
- You remain in control over your investments and determine the frequency of reviews. You also have access to your money when needed because we build liquidity and flexibility into all portfolios.
- Your fees are fair and affordable, and conflicts of interest are eliminated because our compensation is based on the amount of work performed rather than the amount of assets, and it’s a fraction of the cost of using money managers or commission-based advisors.
- You are assured of above-average investment returns by keeping fund costs and advisor fees to a minimum.
- Your taxes are minimized by using index funds and exchange-traded funds.
- Your investment risk is reduced to the level necessary to achieve your goals.
- You get answers to all of your investment questions and implementation support through periodic meetings as-needed.
If you think this common sense approach sounds like a smarter way to manage your money, please give us a call to arrange a free initial meeting so we can answer all of your questions about our philosophy, methodology, services and fees.
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