The purpose of this Investment Policy Statement is to provide meaningful direction and guidance to our firm regarding the selection and management of investment assets based on established and documented investment goals and objectives.
You and your family have financial needs and goals, and therefore, invest for different reasons. One major reason is to grow their wealth—for example, in preparation for retirement. Whatever their reason for accumulating money, there’s another concern that creates the need to invest: the threat of inflation. Consulting a financial advisor can be beneficial in helping to counteract this.
Inflation erodes the real purchasing power of your wealth.
This image shows how much milk you can buy with $0.16 in three different years
Investing Means Taking Risks…
Not investing means taking risks too!
Considering the long-term threat of inflation, not investing means taking risks, too. If you don’t grow your money, you may not be able to afford things in the future.
- Try to Predict The Future
- Picking stocks expected to perform well in the future
- Moving in and out of industry sectors.
- Attempting to time the market.
Act on Impulse
- Approach investing from an emotional perspective.
- Buying at high prices and selling at lower prices.
Bet on Tips & Hunches
- “Get rich quick” perspective and act on tips or hunches.
- Seek out investment insight from cable news programs.
- Follow the advice of friends, neighbors, or family
What Have We Learned?
Focus On What You Can Control And Let The Market Work For You
- Create an investment plan to fit your needs and risk tolerance.
- Diversify globally.
- Manage expenses, turnover, and taxes.
- Stay disciplined through market dips & swings.
Three Keys to Success to Long-Term Investment Success
Philosophy, strategy, and discipline are the keys to long-term investment success.
An investment portfolio is a tool that’s used to achieve your financial goals. The markets are the same for everyone, but how you interact with them is unique to you.
The best portfolios are simple, low-cost, diversified, and tax-efficient.
I believe successful investors possess three attributes. They have a sensible investment philosophy, develop a prudent strategy for their needs using low-cost funds, and stick to their plan with die-hard discipline. It takes all three traits to succeed long-term.
1. Embrace a Passive Philosophy
Philosophy is an investor’s underlying core belief about how markets work and how to best invest in them. The two main philosophies are active and passive.Active investors believe there is enough inefficiency in market prices to profit from trading after all costs.
Active investors believe there is enough inefficiency in market prices to profit from trading after all costs.
Passive investors believe the markets are more efficient than they are at determining prices and accept a market return through index-tracking investments.
The academic evidence is overwhelmingly in favor of passive investors. Those who accepted market returns have performed meaningfully better on average than active investors who try to outperform the markets. After structural costs (fees, expenses, commissions) and behavioral costs (poor security selection and timing errors), the net result of active investors falls far short of passive returns.
I believe passive investing works best for most people. My belief is based on years of study and over two decades of Wall Street experience as a professional trader/money manger.
2. Create a Portfolio Strategy
Strategy puts philosophy into practice. The opportunity to earn market returns extend to every person, however, no one strategy is universal.
Strategy is the unique way each investor personalizes the universal passive philosophy. Every investor should customize their portfolio to their own needs and ability to handle risk.
Strategy starts with an assessment of your financial situation, long-term goals, and ability to withstand short-term losses. This leads to a prudent asset allocation among risky assets, less risky assets and risk-less assets, and to an asset location plan for tax purposes when applicable.
3. Maintain Discipline
Maintaining discipline is the hardest part of investing. Distractions are everywhere. Adjusting a portfolio to keep up with the “news” is futile. Poor relative performance usually results when an investor attempts to trade on information that’s already known and widely disseminated in the marketplace. It’s easy to get caught up in the hype and break discipline, even as an index investor.
There are ways to improve discipline. One way is to keep your portfolio strategy simple. Less complexity means less temptation to make frequent changes. Holding a few, low-cost, broadly diversified funds in a portfolio helps maintain discipline.
An investment portfolio is a tool that’s used to achieve your financial goals. No two people are identical, and neither are their portfolios. The markets are the same for everyone, but how you interact with them is unique to you.
The Best Portfolios are Simple, Low-cost, Diversified, and Tax-efficient.
I believe successful investors possess three attributes:
- Sensible investment philosophy
- Prudent strategy for their needs using low-cost funds
- Stick to their plan with die-hard discipline.
- It takes all three traits to succeed long-term.