Broker Check

Fact-Based Investing:  Why We Manage Investments The Way We Do

Our investment philosophy centers around our prevailing belief about how financial markets ‘really’ work:  That is, that they are self-contained beasts that simply do what they want, vs. what the outside world says they should do!  This belief has a profound effect on we construct and manage client’s investments.

Most advisors put too much of your money into asset classes based on their long-run, historical performance, even when those asset classes haven’t done enough in recent timeframes to earn their way into your portfolio at all. This academic-based approach was conceived for managing endowments and pension funds, which live on forever, not individuals who have a shorter time horizon.  Candidly, in the ‘long-run’ we could be dead before the ‘historical averages’ ever come to pass! 

Typically, advisors manage assets based on concerns around ‘fundamentals’.  These things are happening outside the markets, such as geopolitical events, business news and forecasts, World Bank/IMF activity, fiscal policy, Fed policy, government reports, investor-sentiment polls, demographic trends, etc.  The problem with managing investments this way is that these events are frequently not reflected in the markets for longer than a day or two, if at all, and the follow-on questions of ‘Starting when?’ and ‘For how long?’, can’t be answered. 

The academic and fundamentals-based approach to investing described above often leads to anxiety and emotion-based decision-making. You don’t know why you own the investments you own, and you don’t know when to make changes.  

Our approach to investing is different.  We choose investments for your portfolio that are based on market trends we can actually identify and measure and that exist over multiple time-frames.  Instead of predicting or guessing, we latch onto up or downtrends when they actually come into being.  This momentum is the biggest input in our decision to own an investment. The trend is your friend!  

Likewise, we make changes in portfolios based on real-time analyses of mathematical data from inside the markets - the place where we actually can quantify a one-to-one cause and effect on your investments!  This data is the best indicator of whether or not certain market scenarios either will or won’t unfold and the most useful guide in our investment selection process.  This one-two punch of ‘no predictions’ plus mathematical rule-sets for entering and exiting markets and assets works far more often than it doesn’t. 

In summary: 

‘What should be’ = academic-based theories on investing.

‘What might be’ = forecast-based, fundamental-based investing.

‘What is’ = responding to markets in real time, based on things we can quantify … this is what we do!