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Investment Approach

Your money will be allocated in the most cost effective manner among various suitable asset classes, what is commonly referred to as asset allocation.

Depending on the account size and how much loss you are comfortable with in a 1 year time frame (often referred to as risk tolerance), your money will be invested in one or a mix of the following commonly used financial securities:

  • Exchange Traded Funds (ETFs)
  • No-load mutual funds
  • Individual stocks and bonds
  • Options (covered calls & collars)

The screening process and decision in which ETFs will be used depend on factors such as the funds liquidity, expense ratio, bid-ask spread, assets under management, tracking error, exchange rate hedging and capital gain implications. While for choosing the most appropriate actively traded mutual funds factors such as the manager(s) tenure, investment style, alpha, Sharpe ratio, and expense ratio will be taken into consideration.

Any investment in an individual stock will be as a result of special opportunities that may arise and the investments in that stock will be usually between 3% to 5% of an accounts total value. The general decision on what to buy and eventually when it should be sold will be made based on traditional fundamental valuation parameters, while the exact timing of the buy and the sell will be based on widely used technical analysis.

Although timing the markets on a consistent basis is almost impossible, however if you do need to fund a particular goal in a near future and at the same time the assets classes you are invested in are overvalued, then it may be worth it to sell some investments and have more than the usual amount of cash. Yes if the market runs up you will miss out on the gains, what is commonly referred to as the opportunity cost of not being invested, however if the market has a major correction you can sleep well, knowing you don't have to worry about selling low to fund any of your goals. This approach is in contrast to traditional ‘strategic asset allocation’ method that tends to have a constant exposure in particular asset classes such as the commonly used 60/40 model that has 60% exposure to equities and 40% to bonds.

The goal of such strategic asset allocation models is to create what is widely referred to as an ‘optimized’ allocation of equities, bonds, and maybe some cash and have those allocation remain constant during all times. However periods like the 2008 financial crisis and past bear markets have shown that strategic asset allocation models are not able to offset sharp downturns especially those in equity markets. Obvious reason for this is because these models are overexposed to equities but another reason is because of various factors in financial markets there is now a situation where many asset classes are highly correlated together or basically move in tandem together.

For more information about our firm and the services we offer, send us a quick email or call the office. We would welcome the opportunity to speak with you.

Thank you!