Investment Management

Investment Management is a process where I determine what your portfolio needs to accomplish for you, and how to structure and monitor your portfolio. It's a complex process. The following gives you an idea of the steps: 

A Road Map

The financial planning I've done with you up to this point creates a road map for you portfolio. One of the first stops along the map is determining your minimum Required Rate of Return. This serves as a baseline for our conversations about risk; how much you need to take versus how much you can handle. Sometimes you can afford to take on much less risk than you're currently taking, sometimes it's the opposite. But we'll talk about it and set you on the right path.

The second stop on the map is all about Asset Allocation. This is a process where different parts of the stock and bond markets are mixed together to create a portfolio for you that attempts to minimize your downside risk and volatility risk, while trying to earn a reasonable rate of return. Think of this like cooking with a variety of ingredients, where each ingredient sits on a hypothetical spice spectrum from "low heat" to "high heat". The far left of the spectrum, the lowest "low heat" would be keeping money in cash. On the far right, the highest "high heat" would be emerging market stock investments. Intuitively you understand that if you start with the blandest ingredients and then add more spice, more heat, you incrementally move from left to right on the spice spectrum and your dish gets hotter.

Then equate "heat" to volatility and opportunity for return and you can imagine the blandest ingredients being just that: bland. They have no risk, or maybe very small risk, and they generate the smallest return potential. Since it's only very, very few of us who can invest all in "low heat" investments, we need to spice things up a bit! The question is how much. The answer is a delicate balance of the risk you need and the risk you can handle. This is what Asset Allocation is all about.

Portfolio Construction and Cost

After we determine your appropriate Asset Allocation there are still three steps. First, I review your current portfolio and compare it with your target allocation. Second, I review your portfolio for quality and overall cost. Third, I make recommendations on how to proceed. Very often it's the case that your portfolio is not aligned with your goals and target asset allocation. It's also very common that your investments are not the best quality and are too expensive. If you combine these three things, it's a bad combination. I'll correct it. 

Since I'm not incentivized to sell you specific products I can keep what's good in your portfolio, remove what isn't, and add high quality low cost investments to complete the allocation. 

Keeping quality high and costs low is important to me. You don't want to have underperforming, expensive investments. This combination doesn't make any sense but it's what dominates the investment world today. It's sometimes said that investments are sold and not bought. You go see a broker and receive whatever the day's preferred product is. This leads to expensive stale advice based more on the broker's commission than what's really best for you. That's not what I do so you get better advice, period.

Exchange Traded Funds and Index Funds

I'm not beholden to any company to offer their products. No kick-backs or other commissions or fees from fund companies. This means I get to scour the investment universe to pick the highest quality, lowest cost investments available to use in your portfolio.

My belief is that the overwhelming majority of actively-managed mutual fund managers cannot outperform their benchmark over a long period of time. Some do, but it's a relative few. So I want to build the core of client portfolios with high quality low cost index funds. My product of choice is the Exchange Traded Fund (ETF). The primary benefits of ETFs are transparency, low cost, and liquidity. There are many other advantages to working with ETFs and I'll be happy to discuss them with you. 

Some of the ETF families I use are Vanguard, iShares, Charles Schwab