A summary of these components is listed below. For a more thorough description of our investment philosophy, please download The Informed Investor document (at right).

The Informed Investor - Rising Above the Noise
The investment world is full of people clamoring for your attention, including both the media and investment professionals. However, most of what they say is just noise aimed at gaining your viewership or winning your trust in a futile attempt to predict the market and select superior individual investments. Many work hard to make the investment world seem mysterious or confusing through the use of complex jargon. Fortunately, investing is fairly straightforward. No matter who you are, the sum of your position can be identified by you response towards two beliefs:

• The belief in “the ability to make superior security selections”
• The belief in “the ability to time markets”

Our goal is to help investors make smart decisions about their money. To accomplish this, we help affluent investors move from the noise quadrant to the information quadrant. We believe this is where you should be to maximize the probability of achieving your financial goals.

The Five Key Concepts of Financial Success
While investing can at times seem overwhelming, the academic research can be broken down into what we call the Five Key Concepts of Financial Success. If you examine your own life, you’ll find that it is often the simplest things that consistently work. Successful investing is no different. However, it is easy to have your attention drawn to the wrong issues. This noise has the potential to ruin your chances for financial success.

It is important to note here that while these concepts are designed to maximize return, it is impossible to eliminate risk. No strategy can eliminate risk entirely. Nothing comes without risk in the financial world, for in the absence of risk there is no potential for return. The level of risk is directly proportionate to the possible level of return.

Concept 1: Leverage Diversification to Reduce Risk
Most people are familiar with the concept of diversification--don’t put all your eggs in one basket. However, putting all your eggs in similar baskets is just as dangerous. When an investment group or industry class suffers, you are in for an emotional roller-coaster ride if all of your equities belong to that class. Truly diversified investors--those who invest across a number of different asset classes--can lower their risk, without necessarily sacrificing return. Because they recognize that the performance of specific asset classes is impossible to predict accurately, diversified investors take a balanced approach and stick with it despite volatility in the markets.

Concept 2: Seek Lower Volatility to Enhance Returns
If you have two investment portfolios with the same average or arithmetic return, the portfolio with less volatility will have a greater compound rate of return. By choosing the portfolio with less volatility you, as the investor, not only have a smoother emotional ride but you will also be able to create the wealth needed to reach your financial goals.

Concept 3: Use Global Diversification to Enhance Returns and Reduce Risk
Investors in the U.S. tend to favor U.S. securities--it is much more comfortable emotionally to invest in firms known to the investor. Unfortunately, this emotional reaction restricts these investors to less than half of the world’s investible capital markets. By investing in overseas markets you greatly increase your opportunity to invest in superior global firms that can help you grow your wealth faster. Global diversification in your portfolio also reduces its overall risk. The price movements between international and domestic asset classes are often dissimilar so investing in both can increase your portfolio’s diversification.

Concept 4: Employ Asset Class Investing
An asset class is a group of investments with similar risk and return factors. Though initially the privilege of large pension plans and ultra-wealthy individual investors, institutional class asset funds are now accessible to our wealth management clients. Four major attributes of asset class funds make them attractive:
• Lower operating expenses
• Lower turnover resulting in lower costs
• Lower turnover resulting in lower taxes
• Consistently maintained market segments

Concept 5: Design Efficient Portfolios
Since 1972, major institutions have been using a money management concept known as Modern Portfolio Theory. It was developed at the University of Chicago by Harry Markowitz and Merton Miller and later expanded by Stanford Professor William Sharpe. Markowitz, Miller and Sharpe subsequently won the Nobel Prize in Economic Sciences for their contribution to investment methodology. Through the application of Modern Portfolio Theory and ongoing capital markets research, we design custom portfolios for our wealth management clients to capture better risk-adjusted returns.