Many of our clients prefer to simply delegate the management of their investments to us so that they can put their attention on other matters, such as living their daily lives without distraction. At the other end of the spectrum are “do-it-yourselfers” who think they can be their own financial advisors and normally don’t seek help from anyone, including us. In the middle are investors who do want our investment advice, but also want to remain actively involved in the management of their accounts. That’s who we mean by “serious investors.”
Our basic service to all investors is the same: goal setting, risk tolerance assessment, long-term asset allocation, diversification, and quarterly review and re balancing, all done in the context of comprehensive financial planning so that their investments make sense in connection with their tax situation, insurance needs, retirement planning, and estate planning.
We believe in Modern Portfolio Theory (asset allocation, diversification, periodic re balancing, and “staying the course” through normal volatility). On the other hand, in the last 10 years or so we’ve seen two large declines in the stock market, and another in real estate, that seem way outside the norm based on the previous 50 years. These “outlier” events are statistically unlikely, but they can and do happen, due to macroeconomic cycles, political interference, and investor psychology. They are the vulnerability of Modern Portfolio Theory.
Therefore, in managing our clients’ investment accounts, we follow a pragmatic, common sense “core and satellite” approach, in which a portion of the portfolio (the “satellite”) is kept flexible enough to get out of harm’s way before a major market decline has run its course, and then get back in to take advantage of undervalued opportunities on the rebound. Meanwhile, the “core” portion of the portfolio “stays the course.” This approach, when successful, can reduce overall portfolio volatility and improve performance, compared to straight “buy and hold.”
With large “serious investor” clients, we provide an additional level of service in two areas: First of all, the “satellite” portion of their portfolios is likely to be larger and contain more individual issues. Secondly, the more involved a client becomes with his portfolio, and the more often he is checks on its performance, the more likely it will be for him to experience strong emotions that can interfere with his rational decision making. Therefore, we necessarily get more involved in helping these clients manage their emotions as they track the ups and downs of their portfolios and the individual issues inside them. We do our best to help them keep a level head and avoid making obvious mistakes that could hurt them unnecessarily.
For a complimentary initial consultation regarding any aspect of your financial affairs or concerns, please call us at 818-995-3500.