Money – Wealth Management and Investment Strategy – Our Approach to Client Portfolio Management
We’ve been investing since the 1980’s, with a focus on buying and holding quality investments, using broad diversification, keeping investment costs low, and finding opportunities to strategically re-balance portfolios when the markets shift.
Since the late 1990’s we have seen two dramatic market downturns; the first related to the dot-com bubble and subsequent bust, and the second related to over-leveraging in real estate and subsequent disruption of the credit markets. While these events didn’t fundamentally change our approach to investing, they did challenge us to closely examine our strategy.
In re-evaluating our investment strategy, we have gone back to the fundamentals of portfolio construction and management. We have systematically looked at every asset class we would consider holding, evaluating each one for risk and potential return. In effect, we made each asset type earn its way back into our portfolios. If the return on an asset class is too low relative to the risk, we don’t have it in the portfolio at this time.
We also looked at how the different asset classes work together in the portfolio, which we call correlation. This helps us find assets that balance each other well; they are not all expected to be going up or going down together at the same time.
We use statistical measures to determine the most efficient mix, or allocation, of any set of assets. For each combination of assets, there will be an allocation that seeks to deliver the highest return possible at that level of risk.
Once we have optimized the portfolios, we need to maintain them at the most efficient asset allocation. Each asset class is given a target allocation. When that asset class moves too far from this target allocation it is re-balanced back to the target. We design the process so that trading is infrequent, but once an asset exceeds or falls short of the appropriate range, immediate action is taken. Most companies look at the portfolios once per quarter to see if the portfolios need re-balancing. We use specialized software that scans all accounts every day looking for the opportune time to re-balance the portfolio. This lets us take advantage of short-lived opportunities to sell assets that have appreciated, and buy lower-priced assets to maintain the correct balance.
By building our portfolios from low-cost mutual funds and ETFs, we offer diversification and efficiency at any level of investment risk.It’s important to note that no investment strategy can guarantee a profit or prevent loss. Investing in securities and mutual funds is subject to fluctuation such that, upon sale, shares may be worth more or less than the original cost.
An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
There is no guarantee that a diversified portfolio will enhance overall return or outperform a non-diversified portfolio. Diversification does not ensure against risk. Past performance is no guarantee of future results. Asset allocation does not ensure a profit or protect against a loss.
If you have any comments or concerns, please don’t hesitate to call us at 408-551-6100 or toll free 800-927-8314 and ask to speak with one of our financial advisors or email us by filling out the form below.
Retirement Capital Strategies
A Registered Investment Advisor
1190 Saratoga Ave, Ste. 140
San Jose, CA 95129
Tel (408) 551-6100