financial planning

Our Investment Philosophy

We strongly believe that Modern Portfolio Theory (MPT) and passive asset class investing is the best way for us to develop prudent, long-term portfolios for our clients.

Structured Investment Philosophy
We offer a structured investment approach that integrates academic research and the experience of leading institutional managers.

Unique Implementation of Modern Portfolio Theory
We believe in Modern Portfolio Theory and have access to high-quality institutional investment firms with a unique implementation of this theory into an entire diversified family of mutual funds. Each fund captures the return behavior of an entire asset class, letting us accurately diversify client's investments across multiple assets classes-precisely incorporating the level of risk with which each investor is comfortable. Asset class investing is a systematic, global allocation of your portfolio.

Passive Asset Class Management Approach
As you familiarize yourself with us, you will quickly notice our strong focus on implementing this passive asset class management approach as the best investment strategy. Other advantages of this approach include:

Lower Costs - Passive asset class funds traditionally have lower operating expenses and transaction costs (and thus higher expected returns) than do comparable actively managed funds;

Lower portfolio turnover – Our turnover is roughly 12%, while the industry average is almost 70%;

Greater tax efficiency - Passive asset class funds have relatively low turnover, so less of your annual return is consumed by taxes;

Broad diversification/risk reduction – Our typical portfolio may include over 14,000 stocks, while the industry average is around 2,000 stocks;

Long-term perspective – No HOT money, which is money that moves in and out of investments frequently. We manage wealth with a long-term perspective in mind.

Control of asset allocation – Concentrating on staying diversified captures 94% of the results;

Passive asset class funds - Capture separate dimensions of worldwide returns;

Academic research – Points to the importance of asset class selection, not market timing or security selection.

Importance of Passive Asset Class Investment Approach (Being Broadly Diversified)
We are strong advocates of the passive asset class investment approach. We are convinced that a passive investment approach, which emphasizes broad diversification and market returns in a controlled risk, low cost, tax efficient environment is the right answer for individuals as well as institutional investors.

The following graph demonstrates that asset class selection, not market timing or security selection, is the most important determinant of how well a portfolio performs.

Flaws of Market Timing
Market timing is the shifting of portfolio assets in and out of the market or between asset classes and involves actively buying and selling those stocks that are believed to be mispriced so to capitalize on price corrections. We believe that markets are efficient and quickly and accurately reflect available information so it would be very unlikely that a manager could find a mispriced stock. The flaws of market timing can be demonstrated by removing the effects of the best trading days in the market as shown below.

How could anyone predict when those few "best days" will occur?



2,023 Trading Days


Minus 10 Best Days


Minus 20 Best Days


Minus 30 Best Days


Minus 40 Best Days


Source: John D. Stowe, A Market Timing Myth. Journal of Investing, Winter 2000. Performance is historical and does not guarantee future results. Information from sources deemed reliable, but its accuracy cannot be guaranteed.

*CRSP value-weighted index with dividends reinvested. Compound annual returns assume a 1% transaction cost per portfolio turnover.

Flaws of Stock Selection

Stock selection is the finding of “underpriced” companies or industries. It is best to demonstrate the inability to pick a winning stock combination by showing the following data from the Bogle Financial Center and Lipper, Inc., who studied the performance of 851 US equity mutual funds for two consecutive four-year periods.

• Rankings of Top Ten Funds in one Four-year Period, Compared to Rankings in Next Four-year Period
• US funds*, total annual returns, %

Top Ten in:

Same Funds in:





















*With assets over $100m at end-1996 (851 funds)
Source: Bogle Financial Center, Lipper Inc


It is one thing to say that past performance is no guarantee of future results, but this data demonstrates that this year’s winners may be next year’s biggest losers. The chart above illustrates that the #1 annual return fund from 1996-1999 ended number 841st out of 851 total funds in the subsequent 4-year period. In fact the best ranking for the previous top ten funds was 790th.

This information drives home the fact that the most important way NOT to pick funds is to look at short-term (five years or less) performance.

A Better Way to Pick Funds

The graph below illustrates returns of the distinct asset classes in showing the growth of a $1. The optimum portfolio would capture a particular “dimension” of each of these broad asset classes within a globally diversified portfolio.

Notice how holding bonds and CDs can be hazardous to your financial health due to inflation and taxes. You can also see that the growth of a $1 for small cap value greatly exceeds the S&P 500 (large cap).