Diversified & Elegant
Diversified & Elegant
We don’t actively trade your 401(k), Roth or Rollover IRA. We’re a “hybrid” advisor of sorts. A mixture of active and passive. We invest for the long term in areas we believe have potential for growth. A diversified portfolio doesn’t make a killing, nor does it get killed. There are always several securities that frankly just go nowhere or decline, in value, while one or two take the lead. It makes you say to yourself “what the heck is going on with my portfolio?”, as you check your statements realizing it didn’t make a new high with the Dow Jones Industrial or S&P 500. A 60%/40%, 70%/30% portfolio will likely never beat the benchmarks.
A diversified portfolio divides the invested assets among Exchange Funds of different styles, sectors and geographical theaters, all of which have historically run on different cycles. Growth tends to cycle in contrast to value, large cap to small cap, and U.S. to international/emerging markets.
Its purpose is to suppress, to some extent, the short term and intermediate-term volatility of the overall portfolio, while earning the full returns of all the components in the long run. Since holding broad based Exchange Funds in the long run, in our opinion, carries little or no risk, we regard diversification as a method of reducing the “whipsaw” effect of your portfolio.
What clients often forget is that whatever suppresses volatility must in like kind, suppress rates of return. Diversification will always “mute” the return of a portfolio at any given moment. This isn’t a flaw; it’s a feature. An investor must keep his eyes on the prize: which is the full return of all the different asset classes over the long term; a lifetime of investing.
In a genuinely diversified portfolio, thing are always “under-performing.” That’s how you know you’re adequately diversified. We’ve seen this phenomenon most recently with the obsessive rush to low cost index investing, whereby fundamental valuations are completely ignored in order to “keep up” with an index and save a few dollars annually in fees.
The last thing a rational investor should ever do is to sell the portfolio components that are lagging or negative and buy the ones that are already up. This would have the effect of destroying diversification. And it isn’t investing; it’s speculating. It’s a type of behavior called performance-chasing.
Occasional rebalancing—harvests some of the gains in the leaders in order to reinvest them opportunistically in the laggards. And this wonderful process of diversification—perhaps the ultimate tortoise discipline—will continue to roll serenely on.
Having been in the trading and financial services industry for over 30 years, we’ve spent too much time and energy looking for the Holy Grail of investing; only to realize there is no Holy Grail.
It is not only counter-cultural but counter-intuitive for us to maintain (a) that successful investing has little to do with the perfect selection and short-term market timing, and (b) that our value is unrelated to analyzing the economy, or perfectly timing the markets.
Our value proposition is about 20% Risk Target assessment and 80% behavioral coaching at critical market turning points; everything else is pretty much a refinement.
The beauty of our portfolios is simplicity. Most investors would do just fine holding two or three Exchange Funds. However, to be truly diversified, we typically invest your assets in several broad asset classes using low cost exchange traded funds. Commodities, Equity, Domestic / International, intermediate bonds, long term bonds and precious metals.
To receive a 16-page report of how this strategy might respond in current market conditions, please contact us 847.686.4800; or email us at [email protected]
A cup of coffee and a second opinion
Let’s schedule a meeting where we can sit down for a cup of coffee either in person or in the comfort of your home or office by scheduling a Zoom video conference call. We’ll ask you to briefly to outline your financial goals-and what your investment portfolio is intended to do for you. Then we’ll review the portfolio for and with you.