Our objective is to obtain the best net return for our clients, with as little risk, given their risk tolerance, time horizon, and goals.

There are some very important concepts built into this one sentence, so lets break them down.

the best “net return”... Given two comparable choices, we want the one that gives us the best return after all taxes and fees have been taken out. This is the approach that is going to put the most money in your pocket. As an example, if a mutual fund with high internal expenses is consistently outperforming a low cost index fund, net of fees, we are going to use the mutual fund. If the opposite is true, we are going to use the low cost index fund.

Inherent in this approach is the idea that we do not favor one particular type of product (mutual fund vs. ETF), or one particular investment philosophy (active vs. passive) over another. We believe that investment products are like tools in a toolbox. Each has its own particular set of uses, which can be appropriate in certain situations, and inappropriate in others. It’s like the old saying goes, “when all you have is a hammer, everything looks like a nail.” We want to have access to all the tools we need, and we want them to be of the best available quality.

with as little risk... It is important to maintain an optimal relationship between risk and return. In other words, you never want to be taking a risk that you are not being compensated for. When looking at a client’s portfolio, we always ask ourselves “Can we obtain this same return while taking less risk?” Or, alternatively, “For the amount of risk that is currently in this portfolio, can we obtain a better return?”

given their risk tolerance… We have conservative clients, aggressive clients, and everything in between. An investment that is perfectly suitable for one client may not be suitable for another.

Your behavior and your comfort level with volatility will affect your returns. The reason is that everyone has a threshold of discomfort that, once crossed, will cause them to behave irrationally and make bad decisions. This explains why so much money is made and lost in down markets. We believe it is important to set realistic expectations about how a portfolio will behave, in good markets and in bad. This avoids surprises and increases the likelihood that you will stay the course when it matters most.

goals… If you ask the right questions, it becomes apparent that most people don’t care about having the biggest pile of money. They care about what that money allows them to do…whether their goal is to sail around the world or to buy a cabin in the Alps.

This is where good financial planning becomes important. By first determining what rate of return you need in order to achieve your goals, we can use this information to drive a more prudent investment strategy. Because if you only need a 4% rate of return to accomplish everything you want with your money, why would you take any more risk than you absolutely need to?

In order to achieve higher returns, you may decide that you want to be more aggressive with your investments than you actually need to be. And that’s OK, but it should be a conscious decision.

Phased Retirement