1. An allocation matched to your goals
Most academic studies conclude that the single most important driver of long-term returns is asset allocation – a portfolio’s mix of stocks, bonds, cash, and other assets. A proper asset allocation aligns a portfolio’s risk and return characteristics with your goals, risk tolerance, and time horizon.
Faced with a sea of choices, most individual investors are overwhelmed by this decision. It can take a tremendous amount of research and ongoing monitoring to understand the composition of a single ETF, let alone a basket of many ETFs. Most people simply don’t have the time or interest.
Our investment process involves learning about you and what you are trying to accomplish. Then, we select from a curated universe of ETFs to create a basket designed to work in unison towards those goals.
2. Disciplined decision-making
It’s well known that most individual investors lag the market. One reason is that they choose poor initial allocations (see point #1). But to make things worse, they then make bad follow-on decisions over time. As a group, they load up on risky assets when times are good (buying high), and then flock to safer assets when markets get rocky (selling low).
This has been studied by a company named DALBAR, who releases an annual report on investor behavior. The results aren’t pretty. In their own words, these reports “clearly show that people are more often than not their own worst enemies when it comes to investing.” (Read a full summary here).
We use a disciplined investment process that cuts the emotion out of decision-making. This helps keep you on track and not fall prey to the mistakes that hold back so many investors.
3. Automatic rebalancing
It’s not enough to simply choose an allocation and then coast. Assets move up and down over time, which means your allocations will drift if left untouched. A rigorous rebalancing process sells assets that have grown too large (selling high), and adds to positions that have experienced short-term declines (buying low). This process, performed regularly and dispassionately, is one of the keys to investment success.
We routinely rebalance portfolios using algorithmic triggers. This maintains your target allocation, keeps you moving towards your goals, and lets you focus on other things.