How It Works
Investor Needs and Objectives
Three common investor objectives are growth of assets, current income and preservation of capital. Emphasis on different objectives varies with each client.
We tailor investment portfolios to meet each client’s financial goals by first understanding his or her needs, objectives and expectations. We interview each prospective client to form an investment profile, and determine whether we can help meet that client’s financial objectives.
Important criteria to develop a long-term investment plan include: income and liquidity needs; long-term capital needs; and tolerance to risk.
Many investors lack the time, expertise, inclination or emotional detachment to manage their own portfolios. So they turn to an advisory firm like us for consultation, guidance and management.
We make investment decisions with a long-term view. We avoid allowing short-term economic, news or political events to affect long-term strategies. We do not believe anyone can accurately and consistently predict short-term stock market or interest rate movements. So we focus on the potential long-range value inherent in the ownership of any security.
The asset allocation of a client’s portfolio is based on a variety of factors. The most important is to own securities that meet a client’s objectives, providing the objectives are sound and expectations reasonable. Within that framework, we help determine what mix of investment classes (stocks, bonds and cash) will best achieve a client’s goals.
A prerequisite for any stock investment is to understand exactly what a company does or makes, and how it makes money. Among other factors, we look for strong management; good track records of increasing earnings, revenues and dividends; good prospects for continuing increases in earnings, revenues and dividends; strong balance sheets (particularly with low debt); products and services that will continue to be in demand; and dominance within respective industries.
Decisions to buy or sell securities are based on fundamental research and total return (appreciation plus dividends) potential – not hunches, hype or fads. We look for stability and lack of volatility. To limit a portfolio’s exposure to risk, we diversify among companies and industries. Though we review a variety of outside research sources, most of our investment decisions are based on research generated by our firm.
Bonds and fixed income
We select bonds and other fixed income securities to fulfill a client’s objectives of safety, liquidity and/or income; or because we believe they offer a better investment opportunity than stocks in particular market environments. We do not predict interest rate movements. So maturities of bonds are laddered (that is, the bonds mature in different years) to reduce interest rate risk. We primarily buy U.S. Treasurys, agency bonds, investment grade corporate bonds, municipal bonds and preferred stocks, depending on after-tax yields.
Money market funds or other short-term cash instruments are part of an investment portfolio to meet liquidity needs, or because we are unable to find other securities at any given time that meet favorable long-term investment requirements.
Portfolios are regularly evaluated for individual holdings, cash availability, balance between asset classes, diversity of companies and industry groups, size of positions and tax management.