INVESTMENT SELECTION
Grounded in your plan
Here’s the mindset our Investment Committee brings to studying the markets and developing investment views to implement in client portfolios.
Investment selection basics
Once a financial plan is in place, and once values and risk assessment is completed, we can move into investment selection. For this work, we conduct analysis within three broad categories.
valuation
Valuation is first and foremost. For long-term investments, buying right is paramount. This rings true for every business owner considering the purchase of a business. It’s just as true when we’re talking about buying shares of another firm via the stock market. Valuation is essential across the investment spectrum: large and small company stocks, international stocks, real estate, and bonds.
fundamentals
Fundamentals are also an important consideration. As in sports, there are fundamentals in business. Examples include revenue, margin, profit, return on assets, and level of debt. Stock-market investors tend to focus on the rate of change in fundamentals more than their absolute levels. The same principles apply to the economy at large and the fundamentals of many different investment types.
Investor Psychology
Investor psychology is less important than the prior two for long-term investors, but it tends to get the most attention. We do consider factors such as investor sentiment, but it’s a supporting factor. While there are many ways to measure investor psychology, we seek to follow Warren Buffett’s advice to “be fearful when others are greedy and greedy when others are fearful.
While many investment professionals have extremely deep expertise in a particular type of investing such as managing private equity, hedge funds, convertible bonds, focused equity strategies, etc., we can complement their areas of expertise with other types of investments.
Investment professionals are so dedicated to creating outcomes for their clients in a competitive world, they are left with little time to provide the same level of attention to their own and their families’ financial situations.
To efficiently construct and maintain client portfolios consistent with judgments of our Investment Committee, we apply advanced technology.
Control the Controllables
There are two main “controllables” that impact what you keep of your investments—which is ultimately what drives success, in our experience.
Cost and Fees
You have to know what these are so they can be controlled. Some things are worth paying for—and some things aren’t.
Taxes
Minimizing taxes is ideally a team effort that also includes your tax advisor. There’s an interplay of many factors: how your investments are titled; the types of accounts you use; holding periods; tax rates and many more.
Success requires keeping on track, and keeping on track requires knowing and staying within your comfort zone. It’s important to spend the proper amount of time assessing your willingness to take risks. Then, over time, you also need to measure the accuracy of that assessment.
Our investment philosophy is inspired by Albert Einstein's guidance to "make everything as simple as possible, but not simpler.”