Investing is also a series of decisions. As your portfolio manager, my job is to develop a strategy that is designed to help limit the potential detrimental consequences of those decisions so that if they materialize, they do not derail your hopes and dreams.
History has demonstrated that the equity markets are cyclical. They move up and down over relatively short periods of time (commonly described as cyclical bull and bear markets) and over longer periods of time (described as secular bull and bear markets). Consequently, simply setting your portfolio on cruise control at a single speed is not likely to work for the entire journey.
My investment process is based on the belief that it is my responsibility to do everything I can to help preserve my clients’ assets throughout these market cycles because mathematically, overcoming losses to capital is very difficult. Think of it this way—if your portfolio declines by 10%, you must get a positive return of 11% to get back to where you started. If your loss is 20%, a 25% return is needed just to break even. This is why I believe it is so important to move aggressively to help preserve capital in bear markets in order to have the potential opportunity for future income and growth in the next bull market.
Since I believe that the purpose of investing is to fulfill your goals with minimal risk, we begin with a discussion of your life and how you want your assets to support your life goals. Next I put together a few scenarios for you and verify assumptions. We determine your income needs and establish an income portfolio, if necessary, to meet those first. Then we can move to creating a growth or total return portfolio, depending on your risk tolerance.
My client portfolios are designed to provide appropriate diversification using five major asset classes (cash and cash alternatives, fixed income, US & international equities, foreign currencies and commodities, each with its own minimum and maximum allocation) and four basic strategies:
- Income Conservative—uses closed-end funds, mostly investment grade with some alternative-income and high-yield securities
- Income Moderate—uses closed-end funds, including investment-grade, alternative income, high-yield securities
- Equity Dividend-Paying—designed for moderate growth with income, invests in stocks and more tax efficient, often better for taxable accounts
- Equity Exchange Traded Funds (ETFs)—designed for moderate growth with income and inflation protection; can invest in a much broader universe of securities, often better for tax-deferred accounts
Typically I use ETFs, although mutual funds may be employed to provide exposure to certain asset classes and sectors, where I believe the fund management may add value over index funds. Except for truly exceptional industry leaders, which make up the core of the Dividend Strategy, I generally avoid individual equities to minimize potential risk of exposure to a single company.
Overall, I believe it is more important to make fewer mistakes than to reach for maximum returns. In other words, I believe limiting losses to preserve capital for the next bull market is smarter than “riding it down” hoping for a rebound. I can’t promise to never be wrong, but I do strive to not stay wrong.
As each Fundamental Choice program account is individually managed, construction and ongoing management of portfolios may vary from those discussed in this Philosophy Statement.
Past performance is not indicative of future results, and there is no assurance that any investment strategy will be successful.
The value style of investing cannot guarantee appreciation in the market value of an investment's holdings. The return and principal value of stocks fluctuate with changes in market conditions. The value type of investing tends to shift in and out of favor.
Exchange Traded Funds and Mutual Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.
Investments and investment strategies contained herein are provided for informational purposes only. We would need to review your individual situation before recommending appropriate strategies to you. All investing involves risk, including the possible loss of principal. Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments.
Investment Grade is a rating that indicates that a bond has a relatively low risk of default.
The Fundamental Choice program is not designed for excessively traded or inactive accounts, and may not be suitable for all investors. Please carefully review the Wells Fargo Advisors advisory disclosure document for a full description of our services. The minimum account size for this program is $50,000.
Investments and investment strategies contained are provided for informational purposes only. We would need to review your individual situation before recommending appropriate strategies for you.