Portfolio Construction

Asset Allocation –

The essential building blocks of any asset allocation process and its subsequent recommendations are to first understand the overarching philosophy of the process:

Price Matters – There is really only one rule that works in investing:  buying low and selling high potentially garners positive returns.  We believe knowing the price of an asset class relative to its historical trends may help to determine the future price of that asset class.   In the end, one can only achieve an average rate of return if one starts at an average price, by focusing on market opportunities that are poised to benefit from reversion to the mean.  Thus, we believe that where one starts is a key determinant of where one ends up.

Implementation Matters – There are three levels of asset allocation: strategic asset allocation, tactical asset allocation, and implementation.  The best strategic asset allocation or tactical asset allocation is irrelevant if one cannot invest to take advantage of potential opportunities.  We believe in creating an asset allocation recommendation, and we must ensure the resulting strategy can be optimally implemented.

More Diversification – Though we aim to position the portfolio towards the most attractive asset classes, there is always the risk of being wrong.  A potential hedge for being wrong is to diversify.  We believe allocating assets to more investments than less – if done with consideration to how those investments combine is prudent.

Note - Our Wealth Management System allows the opportunity to look at a client’s entire household picture, not just their individual accounts.  This allows us to make better recommendations as a whole.

Manage Cash  – Cash is an important component of a portfolio that many times gets overlooked.  It can offer downside protection qualities and reduces the need for multiple transactions when a client needs distributions.  However, our primary goal is to garner long-term returns above those attained by cash.  We believe, therefore, that the right balance of return potential and distribution convenience needs to be weighed at all times when establishing the strategic and tactical weights to cash.

Finally - Portfolio Monitoring – On Going Process

There is a high degree of monitoring that goes along with a portfolio once they have been constructed.  The portfolio construction process helps us buy the securities, while the dashboard analysis helps us track what we actually bought.  The goal is to have the most in-depth understanding of what the portfolio holds, what external factors it is potentially exposed to, how any explicit risks may be rewarded by the market, as well as what implicit risks are being taken which we need to watch out for.  Past performance is no guarantee of future results.Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.