Portfolio Structure

INVESTMENT STRATEGY – ASSET ALLOCATION
RISK AND REWARD

These four items are the key to determining investment success.  The structure of your portfolio should be individually tailored to your goals, objectives, and risk tolerance.  What is appropriate for you can vary significantly from what is advocated in the financial mass media.  The investment strategy you use, and your asset allocation are the means by which you try to realize your financial goals while taking account of market conditions and opportunities.  This should be reviewed periodically on an ongoing basis. 

Most people try to gain the greatest return for the lowest risk.  Three types of risk are business risk, interest rate risk, and liquidity risk.  The latter is much less common in financial securities.  These risks are never eliminated but “hedged” to provide as favorable as possible trade off of risk and reward.  Business risk can take the form of “event” risk in individual stock issues, business cycle risk in industry sectors, currency, and political policy risk, and solvency risk in bonds.  Diversification serves to both reduce and balance risk; however, it does not ensure a profit or protect against loss.

Monthly statement valuations and year-to-year comparisons are “snapshots” in time and estimations with regard to many bond positions, whereas the progress of an investment portfolio is a process over time.  It is important to look at the components of a portfolio, give special consideration to overall business and industry cycles, and recognize special situations with unrealized intrinsic value.  As a result, sometimes a periodic principal value analysis is warranted in addition to reviewing statement data.  Monthly statements provide some guidance but are not an end unto themselves.

For over 40 years, we have found that we can most easily understand and deal with the vagaries of the financial markets and market cycles if we keep our focus on the “big picture”: portfolio structure, investment strategy, asset allocation, and risk/reward considerations.  Our goal is neither to identify, and ride the next “hot stock” or “hot sector,” nor promptly react to media commentators.  Rather, our ongoing goal is to help you both “make money and protect money” on a cost-effective basis, with a well-thought-out structure, using a well-thought-out strategy and asset mix.

We look forward to talking with you soon.