Asset Allocation
We believe
that the asset allocation is a significant determinant of long-term portfolio
performance. Because we do not believe in market timing, we do not recommend the
use of timing managers.
We believe in maintaining a strategic allocation and only infrequently revising that allocation. We believe in rebalancing to the strategic allocation. However, the influence of taxes and transaction costs leads us to conclude that rebalancing with fairly wide bands is the most appropriate solution.
Time Diversification
We believe that the
relative risk of increasing equity exposure decreases as the time horizon of the
goal increases. We do not believe that any "investment" should be made for a
goal with less than a five-year time horizon. Funds required in fewer than five
years should be placed in liquid securities (e.g., CDs,
Treasuries) with maturity dates equal to or less than the goals' time
horizons.
Growth versus Value
We believe in the conclusion of
the Fama/French research that, over time, value equity portfolios will provide
superior performance. However, we also believe that eliminating growth
allocations will result in a divergence from the broad markets that clients may
find unacceptable. We therefore believe in incorporating both growth and value
in our portfolios, but include a value tilt to take advantage of this value
premium.
On-going Management
We believe that there should be
regular review of a client's situation to determine if he is continuing to move
in the direction of achieving his goals. This includes revisions in strategic
allocations as a result of revised assumptions or changing client circumstances
or goals. Our responsibility is to assure that our client "stays the course" and
does so with a minimum of emotional pain. We believe that the focus should
always be the client and the achievement of his goals, not the performance of
the portfolio.
In Summary
We believe that although you cannot
control the performance of the market you can control the expenses you incur
when you invest and the timing of the taxes you pay as you invest. We believe
that you can regulate the amount of risk that you take with an appropriately
diversified portfolio. We believe that investing in a
well-diversified portfolio over the long-term with low expenses and high tax
efficiency is the best way to achieve your goals.