Investment Management

Evidence-Based Investment Management

“By letting it go it all gets done. The world is won by those who let it go. But when you try and try, the world is beyond winning.”
– Lao Tzu

Academic research suggests that asset class selection is the prime determinant of overall investment behavior.  We therefore pursue an asset class-based investment strategy with exposure to high quality US and foreign bonds and domestic and international companies of various sizes.  We maximize diversification by “owning the market” via no-load mutual funds and pursue a “passive” investment strategy that avoids making any market timing or individual stock bets.  Owning no-load passive mutual funds also minimizes costs and maximizes tax efficiency given their low turnover.

We strongly believe in market efficiency and that it is not possible to consistently outperform over time by trying to time the market or attempting to pick individual winning securities, an approach known as “active management”.  While it may be true that pricing inefficiencies exist at any given moment, these are at best fleeting and are quickly corrected.  We therefore believe that, in spite of these momentary inefficiencies, security prices are always fairly set since all available information is quickly reflected in market values.  Prices will fluctuate as new information is processed by market participants. However, since this new information is by definition unknowable in advance, no one can accurately predict future performance consistently. This is why active management underperforms a passive strategy over time and across all markets.

Client portfolios will typically be constructed of institutional class, no-load, passively invested mutual funds from Dimensional Fund Advisors (DFA).  We are a DFA Approved Advisor.  See DFA and Aegis Financial Advisory  On occasion, we may also utilize no-load index funds and ETFs from the Vanguard Group.

As an advisor, we feel that our efforts are most productively spent trying to control what we can while accepting what the market gives us in return.  Our focus therefore is always on minimizing costs, increasing tax efficiency and investing broadly.  Our role as an advisor is to set an appropriate asset allocation for our clients based on their investment horizon, personal risk tolerance and required rate of return as a function of their key life goals.  Implementing this strategy using passively managed investments with the broadest possible exposure to a variety of relatively uncorrelated markets is, we feel, the most prudent strategy and the one that is in keeping with a fiduciary standard.  Once that strategy is set, our focus is on helping clients adhere to it regardless of what the market or broader economy may be doing at any given time.  Changes in the strategy should be driven by changes in the client’s situation rather than by external factors.