Our Philosophy
Our Philosophy
1. Embrace Market Pricing
The market is an effective information-processing machine. Millions of participants buy and sell securities in the world markets every day, and the real-time information they bring helps set prices.
Number of Trades – 82.7 Million, Dollar Volume - $346.4 Billion
World Equity Trading in 2016 (daily average)
2. Don't Try to Outguess the Market
The market’s pricing power works against mutual fund managers who try to outperform through stock picking or market timing. As evidence, only 17% of US equity mutual funds and 18% of fixed income funds have survived and outperformed their benchmarks over the past 15 years.
3. Resist Chasing Past Performance
Some investors select mutual funds based on past returns. However, research shows that most funds in the top quartile (25%) of previous five-year returns did not maintain a top- quartile ranking for one-year returns in the following year. Past performance offers little insight into a fund’s future returns.
5. Consider the Drivers of Returns
Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns. Investors can pursue higher expected returns by structuring their portfolio around these dimensions.
EQUITIES
- Market ∙ Equity premium – stocks vs. bonds
- Company Size ∙ Small cap premium – small vs. large companies
- Relative Price ∙ Value premium – value vs. growth companies
- Profitability ∙ Profitability premium – high vs. low profitability companies
FIXED INCOME
- Term ∙ Term premium – longer vs. shorter maturity bonds
- Credit ∙ Credit premium – lower vs. higher credit quality bonds
10. Focus on What You Can Control
A financial advisor can offer expertise and guidance to help you focus on actions that add value.
This can lead to a better investment experience.
- Create an investment plan to fit your needs and risk tolerance
- Structure a portfolio along the dimensions of expected returns
- Diversify globally
- Manage expenses, turnover, and taxes
- Stay disciplined through market dips and swings