Investment Philosophy

Staying the course of wisdom

Let us invest on principle.

Honoring your goals:  Your goals are the focus of our investment philosophy.  Both performance and risk avoidance are likely goals and we always do multi-factor risk analysis designed to give you portfolios which satisfy long run.  If your money doubles in value every seven years (10% rate of return) instead of 14 years (5% rate of return), in 28 years of retirement savings you would see $10,000 grow geometrically to $160,000 instead of $40,000. If attainable, this growth justifies taking possible losses in recessions with the increased probability you have of meeting long run goals. 
Long-Term Perspective:  Market players and market timers should turn to other advisors; they may eventually find that the market is efficient enough to value stocks or asset classes before outsiders can act.  It certainly takes exceptional time, talent, or luck to beat the performance of indices–and most stock jockey advisors don’t have that time or talent. 
Broad Diversification:  Looking at the chart below, one wonders how many of us are wise enough to guess even the winning asset class year in and year out.  Given the unpredictability of asset classes, I generally recommend balanced portfolios purchased with low cost ETFs or no-load mutual funds because the loads alone make most mutual funds underperform the market.  The modern portfolio theory upon which this strategy is based is not flawless, but it does place eggs in many baskets to improve average long term performance with less risk.
Avoiding unnecessary fees:  Certainly planners charge professional fees, but we do so to help you avoid other fees which may well be higher.  Did you ever figure out the fees on life insurance or annuity investments?  Do you now how much banks get when they use your savings account money to lend on houses, cars and washing machines?  Even mutual funds have avoidable fees and no load funds or Exchange Traded Funds (ETFs) are the answer.

With seemingly random markets, clients can take two wise courses:

Meet the Market Strategies

As an Anglo-American historian of the post-industrial era and a business cycle student at the University of Chicago, I’ve learned the broadest perspectives upon long term market history.  While the short run picture is crashing waves of unpredictable force flowing up and down the beach, the long term tidal growth trajectory is based on human resiliency in a spontaneous market order, increasingly superior technical and scientific mastery of nature, and increasing amounts of capital to allow for more efficient but more roundabout methods of production.  Humanity has recovered from world wars, a 1919 flu far worse than the coronavirus, great depressions and great recessions, oil embargoes and environmental degradation.  Providing service at all times, rebalancing portfolios and lending confidence to investors in challenging times give greatest value here.  Past performance doesn’t guarantee future results, but the chart below does show the stock and bond investor’s long-term historical experience.  Index fund purchases of Exchange traded funds (ETFs) or no load mutual funds may approximate the bumpy historical performance below. 

Beat the Market Strategies

For those daring enough to seek improvements on S & P 500 performance, follow me.  I do favor value investing (with heroes like Benjamin Graham, John Templeton, and Warren Buffett) because bargain-hunting stock pickers are likely to find discounted companies with high returns on invested capital that slightly outperform the glitter of growth over time, and certain premiums can be gained for small cap investing or investments abroad where the earnings per share is higher than in America.  Investors who want to hedge boldly may consider relatively conservative options strategies based on Austrian Economics:  we may gamble against government-induced inflationary policies and the resulting herd behavior leading to booms and busts.  This strategy appears vindicated by superior market performance.

This chart was the basis of our logo:  it ties the gentle San Lorenzo Valley to stock and bond market growth since 1926.

“Life is either a daring adventure or nothing at all.” – Helen Keller