|
|
| |
| Our Investment Philosophy |
|
|
Our approach to developing and managing
investment portfolios is predicated on certain fundamental
assumptions with regard to the factors that most influence
investment success; among these factors are the following:
|
| |
Asset Allocation
The returns to a portfolio will be more influenced
the particular mix of investment classes than by any
other single factor. A study by Brinson, Hood, and
Beebower showed that 94% of the variation of returns
among institutional portfolios could be attributed
to the asset allocation decision, while 4% was
attributable to individual security selection, and
2% to market timing decisions. Asset class
categories consist of things like money markets,
bonds, domestic large company stocks, domestic small
company stocks, international large and small
company stocks, real estate securities, and emerging
market securities, among others. When we develop
your investment policy, it includes specific targets
for each of these categories. |
| |
Value Criteria
Numerous studies have demonstrated that stocks
trading at low multiples of their book value per
share offer higher returns in the long run. If one
particular market segment is to be favored over
another, therefore, it makes sense to overweight
value stocks over so-called growth stocks (i.e. low
price-to-book ratio stocks versus high price-to-book
ratio stocks). We typically give client portfolios
exposure to the broader markets supplemented by
additional investments in value stocks; we never
make specific allocations to growth stocks. |
| |
Size Criteria
It has also been demonstrated that the size of a
company influences its expected return, with smaller
companies offering higher returns than larger
companies over the long run. A well-diversified
portfolio will have a significant allocation to
smaller-company stocks. |
| |
Fees and Expenses
The future returns to any individual investment, or
asset class, are not under our control. We can,
however, exert prior control over the degree to
which those returns are reduced by ongoing fees and
expenses. Investments with low ongoing expense
ratios, therefore, should be favored over
investments with relatively high expense ratios,
without regard to whether or not the investment
vehicle was able to overcome its high expenses in
the past. |
|
| |
|
