Research

Decades of academic research suggest that most active managers - whether managing mutual funds, separate accounts, or hedge funds - do not outperform the market itself. Although some active managers outperform the market during certain periods, it is impossible to know in advance which managers will beat their relative benchmark indexes. Broadly diversified index-based funds are generally much less expensive and much more tax-efficient than actively managed funds.

Hiring an active manager to pick needles out of a haystack is simply inefficient, costly, and unproductive over the long term. It is better just to own the haystack. You can own the haystack by using funds with an index-based strategy of owning the market, while tilting the weightings of the index towards securities that have the characteristics that have been identified in academic research to produce the highest returns over time.The firm partners with a number of different resources that perform the research necessary to accomplish this. 

Portfolio construction is guided by the firm's underlying investment philosophy comprised of four core principles: 

1. Diversify -- Successful investment plans depend on diversification. Diversification is about limiting extreme short term fluctuations and portfolio volatility. We strive to reduce risk and volatility by allocating wealth across a variety of different, less correlated asset classes and across investment products with varying management styles. Portfolio diversification also provides continual exposure to outperforming investments as asset classes and styles move in and out of favor.
2. Focus on the Long Term -- For most asset classes, even high risk/high reward ones, the positive performing years outnumber the negative years. Maintaining a long-term horizon affords greater risk tolerance and the opportunity for assets to grow through compounding. Excessive concern about short-term market results is incompatible with achieving long-term results. 
3. Act Contrarian -- Too often investors undermine results by chasing short-term performance. We believe that a contrarian stance increases the probability of long-term success. Taking a contrarian approach to asset class valuations reduces the risk of buying at a cycle's peak only to be undercut by the inevitable correction. 
4. Be Prudently Aggressive -- Inflation, not volatility, is the greatest threat to purchasing power and financial security. Abandoning the price fluctuations of stocks and bonds in favor of cash-equivalent investments may seem like a safe path, but is unlikely to achieve financial and life goals. Risk is the necessity to transform savings into wealth. Success lies in taking risk when it is prudent and managing risk when it is possible. 

Please remember that diversification and asset allocation do not guarantee a profit nor protect against loss in a declining market. They are methods used to help manage risk.