Our Investment Philosophy
Fee-Based Management
Traditionally, individual investors have purchased securities in commission based accounts. In these accounts, the advisor receives a commission or "load" at the time of purchase, and a trailing fee after that.
The problem with these accounts, which are still widely used by many advisors today, is that they provide little incentive for the advisor to work to innovate and grow your money. In addition, in many cases commission-based accounts can make periodical tactical re-balancing of account funds more complicated or expensive.
We use a fee-based system so we can focus on managing and growing your assets rather than selling. With fee based accounts, you pay a management fee as a fixed percentage of your managed assets. We pay the fees associated with trading your funds. Since our fee is a percentage of your assets, our performance is tied to yours.
Modern Portfolio Theory
One of the major concepts that most investors should be aware of is the relationship between the risk and the return of a financial asset. It is common knowledge that there is a positive relationship between the risk and the expected return of a financial asset. In other words, when the risk of an asset increases, so does its expected return. What this means is that if an investor is taking on more risk, he/she is expected to be compensated for doing so with a higher return. Similarly, if the investor wants to boost the expected return of the investment, he/she needs to be prepared to take on more risk.
In order to balance risk and return to match your financial objectives, we use Modern Portfolio Theory (MPT). One of the most important and influential economic theories dealing with finance and investment, MPT was developed by Harry Markowitz and published under the title "Portfolio Selection" in the 1952 Journal of Finance. MPT says that it is not enough to look at the expected risk and return of one particular stock. By investing in more than one stock, an investor can reap the potential benefits of diversification - chief among them, a reduction in the riskiness of the portfolio. MPT quantifies the benefits of diversification, also known as not putting all of your eggs in one basket.
