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Our Investment Philosophy

When reviewing investments and your goals, there are two most important factors:

1. Your time horizon

2. When you need the funds, which relates to risk tolerance – more on that in a minute.

Our philosophy is that investment returns relate directly to risk. The higher the risk, the higher the returns. The objective is finding the sweet spot where your maximizing your returns for the risk your taking. Our clients want to maximize growth of their invested assets, so that they can reach their goals in a timely manner.

Risk translates into volatility – the amount your account value goes up and down during any given period of time. Most clients don’t like volatility, and we help manage investor behavior by remaining focused on your goals, while monitoring important economic indicators about the nature of the markets and performance of your individual investments.

Risk can be relieved by investing in a larger number of investments.  In this way, risk relates less to movement of one stock when their are more stocks in the picture. However, there still is a relatively small number of investments, for example 30 stocks, that move very much in sync with a portfolio of 500 stocks. The size of a portfolio is a variable worth monitoring.

What is Risk Tolerance?

We believe risk tolerance has two components:

1. Your willingness to accept risk (e.g. take a calculated risk, like a $100 wager)

2. Your risk capacity, which is your capacity to absorb losses. This relates strongly to your time horizon.

A 25 year old investor, retiring at age 70, may like safe and secure investments; however, their capacity to absorb and make up for investment losses that might occur in the next 45 years is very high. Contrast this to a 75 year old retiree, who relies deeply on every dollar available in the household to live a modest lifestyle.

When it comes to risk tolerance, we tend to focus on your goals and help you understand your investment behavior in relation to your goals, so that you make decisions that effect your investments positively in the time frames you are planning.