We manage portfolios to realize clients’ goals that may be anywhere from 5- to 25-years ahead, and this reality drives our investment approach.

You Select a Portfolio

We develop alternative portfolios for you to evaluate. With each alternative we present you with statistically projected rates of return and volatility. The more demanding your return objectives, the greater will be the volatility of your portfolio. You decide whether to select a particular portfolio alternative based on a comparison of the projected returns with the projected expenditures implied by your goals, and your ability to accept the projected portfolio volatility.

When you decide that the projected volatility of an otherwise suitable portfolio is uncomfortable, or exceeds your “tolerance for risk”, we work with you to achieve an acceptable solution. This process typically involves either extending the time horizon for some personal ambitions, modifying the scale of some plans, or accepting a more volatile portfolio than you originally envisaged. Sometimes the solution involves modifications in all three areas.

How We Derive Alternatives

We apply statistical techniques to help us identify diversified portfolios with favorable return and volatility projections. We identify alternative portfolios by projecting returns and volatility for different allocations among a variety of asset classes (e.g., Large US companies, Small US companies, European companies, Asian companies, Bonds, Real Estate, Cash, etc.).

Varying the portfolio allocation among the asset classes generates alternatives with distinctly different return and volatility characteristics. The statistical projections for the portfolios derive from similar projections for indices representative of each asset class. The returns and volatility of these asset classes differ widely, and so do correlations among the returns.

The projections for the indices derive from analysis of historical data extending over many years. Research shows that the range of returns for individual asset classes, and the relationship of returns among asset classes are remarkably consistent, so that historical analysis provides a reliable basis for projections.

How You Can Influence Investment Selection

When you decide upon a portfolio allocation, we select the investments. We can realize your selected portfolio allocation with individual stocks and bonds, with actively managed mutual funds, with index funds, or some combination. Our bias is toward mutual or index funds since research indicates that the allocation among asset classes is a far more significant predictor of long-term portfolio performance than stock selection. By some estimates asset allocation explains over 90% of long-term return. Nonetheless,we do incorporate a limited number of individual securities in some client portfolios where there are reasons to do so. These reasons range from expectations of superior near-term performance to tax and estate duty considerations.

When we use actively managed mutual funds in a portfolio we attribute an allocation or “style” to the funds. These attributed style determine the size of the investment in each fund as we build your portfolio. We attribute the fund styles by comparing the returns of the funds and indices representing asset classes in which the fund invests.

Performance Measurement

We manage portfolios to track the allocation that you select. We evaluate portfolio performance through quarterly return comparisons with a benchmark based on the selected asset allocation. We also offer comparisons with the S & P 500 and other relevant domestic and international indices.

Transactions

We initiate portfolio transactions for two reasons. First, we adjust the allocation periodically to align with the benchmark: in most instances we “rebalance” to align with the benchmark semi-annually. Second, we initiate transactions when it is apparent that opportunities exist to upgrade individual portfolio holdings. Nonetheless, we strive to ensure that portfolio turnover is modest.