Five Rules for Strong Investors

• Market prices reflect value, sentiment, and noise. Psychological factors and emotions can disconnect asset prices from their true value. This can happen in bear or bull markets, and it can impact any type of investment asset. Undue enthusiasm or gloom often leads to poor decisions, a risk confirmed in a study by Dalbar, a market research group. The study showed that most investors get long-term results that are far below market averages because emotions drive them to buy high and sell low. Many amateurs and professionals alike fall prey to this risk, which is known as “the investor behavior penalty.”

  We believe in a rigorous, research-based approach to investment decisions. We analyze each client’s financial position as well as the current market opportunities. We help clients avoid being caught up in euphoric but unrealistic market highs. We also provide the insight and intestinal fortitude needed to seize the bargains that abound in fear-driven markets.

• Process over outcome. Although the investment world is full of uncertainty, you needn’t “play it safe” by relying solely on indexed funds. We believe you can gain an edge by taking a disciplined approach and making decisions based on in-depth market research, not emotions. Our process aims to provide you with the research and the discipline to make sound decisions and optimize your portfolio.
• Don’t let the performance tail wag the dog. While performance plays a vital role in managing investments, too keen a focus on short-term performance often leads to faulty conclusions and trend chasing. The best performance comes from having a portfolio with the right vehicles to achieve your end goals. We use short-term results to aid us in making tactical decisions. Our strategy for each client is based on full market cycles, strong fundamentals, and long-term performance indicators.
• Risk and volatility are not the same. A well-built portfolio matches a client’s specific needs with market opportunities. For clients with a longer time horizon, that mix might include more volatile assets that offer attractive returns. For clients who need income-producing investments, the best vehicles maximize income while preserving capital. No attractive investment is risk-free. We seek to minimize risk by looking more at the fundamentals of holdings than recent performance.
• All else being equal, the more efficient a portfolio is, the greater the wealth-compounding effect. We believe there is a place in every client’s portfolio for actively managed holdings, with their higher costs, as well as lower-cost passive securities. As a fee-only investment advisor, we can objectively select the best strategies and managers for each asset class. Regardless of what mixture works best for you, we will seek the most efficient investments available (low cost, low turnover). The goal is to better allow the miracle of compounding—the 8th wonder of the world—to grow your wealth over time.

We invite you to examine our views on retirement and other wealth management needs. For a more thorough understanding of our investment philosophy, read Joseph J. Janiczek’s book, Investing from a Position of Strength.