Investment Philosophy

To understand our investment philosophy, you should understand what we believe and don't believe about investing.

First, we don't make forecasts about the markets, inflation, the dollar, world events, or interest rates. We don't attempt to pick one stock over another or one mutual fund manager over another hoping that our knowledge of a stock, mutual fund or manager will produce a superior return. We don't believe investing in actively managed mutual funds with the intention of beating the "market" is worth the extra cost. In our opinion, it is impossible to distinguish skill from luck when evaluating mutual fund managers. We believe these types of activities don't add value to the investing process and that history and research agree.

Here is what we do:

• Capture market returns: Since we believe capital markets work, we seek to get as close as possible to the market rate of return of a chosen asset allocation in a methodical and efficient process that is appropriate to the client's life circumstances and goals.
   
  
• Reduce expenses: We prefer low cost, passively managed investment vehicles and seek to avoid all actively managed financial products. The products and vendors we recommend to our clients do not pay us, so our focus is on reducing your overall cost.
   
  
• Reduce Taxes: Our investment recommendations are made in the context of a client's overall tax situation and we seek to use appropriate tools to reduce taxes.
   
  
• Diversify: Our investment recommendations consider multiple asset classes and parts of asset classes to reduce overall risk. Diversification is more than spreading money among several mutual funds since funds often overlap in what they own.
   
  
• Stay Disciplined: We recommend an asset allocation based on the client's financial plan, not economic conditions, and we believe the allocation should change only if the client changes. This is why we consider financial planning an ongoing process. We manage investments according to an agreed upon investment policy statement so our recommendations do not "drift" over time. Our "market timing" is done retroactively. Since we have no knowledge of what the markets will do tomorrow, we wait for the markets to do what they will, and then rebalance back to the chosen asset allocation.

We believe doing these things increases returns over time. They are grounded in academic research, historically tested, and easy to understand. We believe many investors don't do these things because they lack the time or the interest, they change course, or the advice they have been given is not in their best interest.

In our opinion, if you are paying for financial advice, you should be getting more in return, economically, than what you pay. The value of paying our fee comes not from our forecasts (we have none), but from doing the fundamentals over time.