Philosophy For Investment Management
Run your own race: After two decades of having a backstage pass to sit with some of the best money managers in the world, we’ve seen the evidence that a goal-focused, plan-driven portfolio, steered by
faith, patience, and discipline, properly asset allocated, broadly diversified, and regularly rebalanced, is the most helpful way to achieve real-life returns.
Faith
What do I mean by faith? I'm not talking about blind faith, but faith based on evidence backed up by history. Mosthumanity wants to do good things for their loved ones and neighbors as we've enjoyed more than four decades of peace this world has never seen. Think about the advancements in medicine, agriculture, and technology leading to longer life expectancies, increased freedom, and lifting more than sixty percent of the world's population out of poverty.
Patience
I've heard patience defined as not doing something stupid. In the context of investing, it means keeping your head when everyone else is losing theirs. Not everyone is getting wealthy buying real estate or trading Bitcoin.
Discipline
Discipline is continuing to do the right things. When the market is down, keep saving. When the market is up, trim your winners. There is no get rich quick trade, and no one is always right about the economy and markets. Our critical mission is not making that "big mistake".
Asset Allocation
Asset allocation is the largest determinant of what drives your long-term returns. The amount of stocks, bonds, cash, and real assets in your portfolio should be based on your risk tolerance, time frame, and tax bracket. If we get this right, more than ninety percent of the long-term performance of your investments will be rooted in your allocation.
Diversification
Diversification is not putting all your eggs in one basket. Having a mix of investments within each asset class should reduce risks and increase your return potential. For example, historically, stocks have provided most investors with returns that outpace inflation when they've owned quality large, mid, and small company stocks within their portfolio.
Rebalancing
Rebalancing helps long-term investors and accumulators to buy low and sell high. Our enemy is not a decline in our investments' value because subsequent gains eventually dwarf our temporary declines. Panic is our enemy, and the best path to overcome our sense of panic is to review our portfolio positions and rebalance them. There's solid statistical evidence that suggests an annually rebalanced portfolio, selling what's up and buying what's down, has provided better than average risk-adjusted returns and supports lower costs.
Our CAP3 Investment Process
We aim to ensure our clients are prepared for the future, not focused on the fool's errand of attempting to predict the future. With the freedom to work with and study some of the brightest professionals we could find, we’ve connected their compelling work and created an actionable investment process we call our "CAP 3" approach.
The “why” is as important as the “how.” Your investments may face three markets: "up" markets, "down" markets, and "flat" markets. We never know which one is coming, so we prepare for all three.
C
Capital Appreciation
A portion of your portfolio will be invested for long-term growth. Risk is important. Taking on risk is vital, like oxygen for your investments. Historically, stocks are the key drivers that provide returns needed to grow your accounts greater than inflation.
A
Asset Protection
Our goal is to protect a portion of your portfolio from experiencing the full downside of the market. Controlling investment risk is all about you never getting wiped out. The theory here is that missed opportunities may be made up far easier than losses of capital because an investor makes an emotional decision.
P
Producing Income
Producing income from several sources can help face the challenges of a low-growth environment. These same securities help to preserve your money when time gets hard.
3
3 Months/Years
This part of the process helps with peace of mind. If you are still accumulating wealth, you should have a three-month cash reserve to protect you and your family’s daily lives.
If you draw funds consistently from your accounts, you should have three years of your "gap" income in fixed, safe holdings. Why three years? To protect your accounts from short-term losses. The capital markets seldom stay down for more than three years in a row. 2000, 2001, and 2002 were the only
times in recent history that the US stock market was down three years.
What’s this all for? To ensure your strategy is personal, market-tested, and repeatable. Our professional approach is disciplined and repeatable. We're confident that our CAP 3 approach may tip the odds of
successfully meeting your life goals in your favor.