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Building Your Investment Strategy

Building Your Investment Strategy

Together we can take the guesswork out of your financial future. We use industry-leading technology that quantifies your acceptable levels of risk and reward. Using Riskalyze, we ensure that your portfolio defines your investment goals and expectations.

The old way of assessing risk, stereotyping investors with subjective semantics, simply doesn’t work. The words aggressive investing or conservative investing may mean something different to you than they do to someone else, and a person’s age doesn’t always determine those factors anyway. We treat our clients as individuals.

Our approach utilizes something called the Risk Number. It’s a quantitative way to pinpoint how much risk you want, how much risk you currently have in your portfolio, and how much risk you need to take to reach your goals. It’s a number from 1 to 99. A Risk Number of 1 is like having cash under your mattress and 99 is like having all of your investments in a single speculative stock.

We then stress test your new portfolio, discuss your 95% probability range, and set expectations for what's normal behavior for your investments.  


Our Investment Philosophy

Our investment philosophy is that a diversified stock portfolio has the most predictive return over a long period of time. This has been the case since 1926. However, stocks have the most short-term volatility. When we look at daily returns, S&P 500 returns are positive about 53% of the time. This is not much more than a coin flip. However, when we look at returns over every available calendar year, the percent of positive years is about 74%. On rolling 10-year periods, this increases even more to about 94%, and every 20-year period in history yields positive returns. An investment portfolio then becomes more of a product of an investor's time horizon than any other factor.

Additionally, an investor's desire (risk tolerance), ability (liquidity and income needs compared to net worth and cash equivalents), and need (average returns needed to achieve goals) for risk influence the portfolio allocation.

Our standard practice is to monitor Sharpe ratio (excess return per unit of risk) and diligently track alpha compared to benchmarks. Most importantly, we choose each investment for a specific purpose. Are we purchasing a stock for revenue, free cash flow, earnings, or dividends? We call this our RFED strategy. Knowing the purpose of each individual holding in a portfolio and projecting how it impacts the overall efficiency of that portfolio is what allows us to design strategic and sophisticated solutions for your investments.


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