A: Most of our clients are investing for retirement, so the biggest risk we have to manage is to make sure that there is no permanent loss of capital. We are also concerned about their future cash withdrawal needs and how inflation is expected to affect their portfolios.
The other significant risk is market volatility. Investors are human and they tend to react to headline news with emotions. For instance, they may decide to sell their holdings at a time when the stocks are out of favor. One of our goals is to educate clients that markets are inherently fragile and prepare them for the market volatility. In fact, volatility can also be our friend and can take advantage of the market gyration to add selectively in the portfolio.
A: Our customized Separately Managed Account portfolios are constructed with the client’s investment objectives and risk tolerance in mind. Portfolios can be growth, which is an equity-only portfolio, aggressive growth, which is an enhanced equity-only portfolio, growth and income, an equity-only portfolio including growth stocks and dividend paying stocks, balanced, which is a portfolio of equities and fixed income securities, or a fixed only portfolio.
Portfolios can be domestic, international or a combination of the two. In the case of international equities and fixed income, we can use mutual fund instruments or ADRs.
When creating a portfolio we primarily consider the following factors: risk tolerance, growth objectives, current income requirements, and investment time horizon.
By employing a strategic asset allocation process, we form an appropriate blend of equities, fixed income and cash or equivalents. The aim of this process is to maximize long-term performance while minimizing volatility. We review our asset allocation on an annual basis at a meeting with the client. Of course, market conditions may require rebalancing of the portfolio to remain in compliance with client’s asset allocation.
For balanced portfolios, fixed income securities can provide a reduction of risk, reduce volatility and generate interest income. We may invest the fixed income portfolio in a diversified portfolio of fixed income funds.
A: Our investment philosophy is to invest long term, in growing companies, with sufficient diversification to lower risk, and low turnover to reduce transaction costs.
We believe in being fully invested with a focus on sectors providing the best opportunities and companies that demonstrate strong growth fundamentals. Fundamental analysis and financial statement scrutiny are the foundation of our investment philosophy.