Investment Philosophy

I believe that life is a series of decisions. Sometimes the outcomes are reasonably predictable, and sometimes they are not. Not acting is also a decision. All decisions have consequences. Some decisions have beneficial consequences, and some are detrimental.

Investing is also a series of decisions. As your portfolio manager, my job is to develop a strategy that is designed to help limit the potential detrimental consequences of those decisions so that if they materialize, they do not derail your hopes and dreams.

History has demonstrated that the equity markets are cyclical. They move up and down over relatively short periods of time (commonly described as cyclical bull and bear markets) and over longer periods of time (described as secular bull and bear markets). Consequently, simply setting your portfolio on cruise control at a single speed is not likely to work for the entire journey.

My investment process is based on the belief that it is my responsibility to do everything I can to help preserve my clients’ assets throughout these market cycles because mathematically, overcoming losses to capital is very difficult. Think of it this way—if your portfolio declines by 10%, you must get a positive return of 11% to get back to where you started. If your loss is 20%, a 25% return is needed just to break even. This is why I believe it is so important to move aggressively to help preserve capital in bear markets in order to have the potential opportunity for future income and growth in the next bull market.

Since I believe that the purpose of investing is to fulfill your goals with minimal risk, we begin with a discussion of your life and how you want your assets to support your life goals. Next I put together a few scenarios for you and verify assumptions. We determine your income needs and establish an income portfolio, if necessary, to meet those first. Then we can move to creating a growth or total return portfolio, depending on your risk tolerance.

My client portfolios are designed to provide appropriate diversification using five major asset classes (cash and cash alternatives, fixed income, US & international equities, foreign currencies and commodities exposure through ETFs/Mutual Funds/individual issues, each with its own minimum and maximum allocation) and four basic strategies:

Income Conservative

mostly investment grade with some alternative-income and high-yield securities

Income Moderate

including investment-grade, alternative income, high-yield securities

Equity Dividend-Paying

designed for moderate growth with income, emphasizing investments in individual stocks, more tax efficient, often better for taxable accounts

Equity Exchange Traded Funds (ETFs)

designed for moderate growth with income and inflation protection; can invest in a much broader universe of securities, often better for tax-deferred accounts

Typically I use ETFs, although mutual funds may be employed to provide exposure to certain asset classes and sectors, where I believe the fund management may add value over index funds. Except for truly exceptional industry leaders, which make up the core of the Dividend Strategy, I generally avoid individual equities to help minimize potential risk of exposure to a single company.

Overall, I believe it is more important to make fewer mistakes than to reach for maximum returns. In other words, I believe limiting losses to preserve capital for the next bull market is smarter than “riding it down” hoping for a rebound. I can’t promise to never be wrong, but I do strive to not stay wrong.