The fundamental investment risks that we all face are outliving our assets and not achieving our desired financial goals and objectives. Since consumer prices could triple over the next 30 years, long-term investors must not only be concerned about preserving their principal, but also with protecting their purchasing power and growing their assets over time. If you understand this investment risk, you can take greater advantage of the principles used by the institutional investors.

2. Create An Investment Policy

An Investment Policy Statement (IPS) is critical to a successful investing experience and to a successful client/advisor relationship. A client’s clear understanding of his or her investment goals, time horizon and risk tolerance is the first step to creating an investment plan. An understanding of investment history will help determine the risk level with which you are most comfortable. A good IPS is invaluable in times of market turmoil and can instill discipline in the investment process. At each client meeting, we first review the IPS as a basis of evaluating performance and recommendations.

3. We Believe In Time, Not Market Timing

Time is one of the most powerful forces in any investment program. The length of time investments will be held, the period of time over which investment results will be measured and judged is the single most powerful factor in any investment program. This is because time transforms certain investments from least attractive to most attractive and vice versa.(1) Time allows for the compounding process to work for an investor. In summary, we believe in TIME, not market timing.

4. Asset Allocation, Asset Allocation, Asset Allocation

Asset allocation (the percentage of Equity, Alternative Investments, Fixed Income and Cash that the portfolio consists of) is the most important decision made in the investment process. Studies indicate that over 90% of investment return is determined by asset allocation decisions(2), not individual security selection.

5. Diversify, But Do Not Over Diversify

Diversification of equity investments among style (growth and value), size (large, mid and small cap), and geography (US and International) makes for a smoother ride on the road to investment success. Each investment style, size and geographic category has unique performance characteristics which do not necessarily correlate to each other. While we prefer the intrinsic value style, we understand a portfolio should comprise all of the various asset classes, styles, and geography. Most of a portfolio's return and volatility will be due to style, size and geographic decisions, regardless of whether these decisions are made explicitly or implicitly.

6. Protect Your Portfolio

"It is not the head, but the stomach which determines your fate" (3) Investment success is purely a function of two things: 1) recognition of the inevitability of major market declines; and 2) emotional / behavioral preparation to regard such declines as non-events.(4) A well thought out Investment Policy will help protect your portfolio from yourself and which considers your income needs and investment time horizon and includes an appropriate asset allocation model designed around style, size and geographic diversification will help you cope with the inevitable market declines and capitalize on the opportunities presented when they occur. Your ability to cope with investment volatility is your admission ticket to long-term superior returns. It is our job to assist you in the navigation of this task.

7. Don't Let The Tax and Fee Tail Wag The Economic Dog

It is appropriate to strive to be efficient in the areas taxes, trading costs, and management fees. However, the economics of an investment is the most important consideration. Put another way, you must not allow the tax tail to wag the economic dog.

8. Know Your Manager

Blending active institutional managers with passive institutional investments is the best way to build a successful portfolio. We do not believe the market is always efficient, but we do believe it is always in the process of becoming efficient. (5) Very few managers can consistently take advantage of temporary inefficiencies and outperform over a very long period of time. This is why we have a very short list of "Guru" institutional managers for each style, size and geographic category. We monitor these managers carefully, focusing on risk adjusted performance, style consistency, discipline and other traits that makes them "Guru" mangers.

9. Eat Your Own Cooking

We eat our own cooking. Our team invests their personal assets with the same managers, individual stocks and other investments as our clients. When selecting investment managers, we select managers who have a significant portion of their net worth invested in their portfolios along with our money. We believe that managers with true conviction will invest along side their investors.


(1) Charles Ellis, Winning The Loser's Game
(2) Brinson, ct. al. Study
(3) Peter Lynch, Beating the Street
(4) Nick Murray, The Excellent Investment Advisor
(5) Peter J. Tanous, Andrew P. Tobias, Richard C. Breeden, Investment Gurus: A Road Map from the World's Best Money Managers