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Our Philosophy

Photo by Hugh B – MFG clientMore information

We Work to Provide a Durable Investment Solution

Investing makes it possible for many of us to achieve important lifetime goals, such as retirement, higher education and a legacy for our families. That’s why we believe a better wealth experience requires a consistent investment approach based on financial science and grounded in real-world results. We believe in an approach that you can trust and understand-one based on research, analysis and evidence – not luck or prognostication.

Our Asset Class Investing philosophy is based on almost nine decades of data, analysis and research, insights from behavioral finance and close relationships with leading academics — including our Investment Committee members, Dr. Meir Statman and Nobel Laureate Dr. Harry S. Markowitz

There are four key concepts which play a vital role in the construction and management of our portfolios.

Concept One - Part OneLet Markets Work for You

We Believe

Instead of trying to beat the market, let the long-term growth potential of markets around the world work for you. Over time, stocks have significantly outperformed inflation – as well as bonds. Yet  most active money managers have consistently failed to outperform. This is why we only use strategic Asset Class investments – which let markets  work for you by focusing on delivering market returns.


How We Know

$1 invested in the U.S. Stock market in 1802 grew to $1.03 million by 2014. That’s the power of free markets, powered by human innovation.

graphicAnnReturn1802-2014

Markets have been significant generators of long-term wealth for investors

Source: Siegel, Jeremy, Future for Investors (2005), With Updates to 2014 Data is from Jan. 1, 1802 – December 31, 2014 Hypothetical value of $1 invested on January 1, 1802 and kept invested through Dec. 31, 2014. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Stock investing involves risks, including volatility (up and down movement in the value of your assets) and loss of principal. Investors with time horizons of fewer than five years should consider minimizing or avoiding investing in common stocks. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer's creditworthiness declines, and are subject to availability and changes in price. The price of gold may be affected by global gold supply and demand, currency exchange rates and interest rates. Investors should be aware that there is no assurance that gold will maintain its long-term value in terms of purchasing power in the future. T Bills are backed by the US government and are subject to interest rate and inflation risk. T Bill values will decline as interest rates rise. The value of the U.S. dollar depreciates over time with inflation, so the primary risk is inflation risk.

Concept One - Part TwoLet Markets Work for You

We Believe

Instead of trying to beat the market, let the long-term growth potential of markets around the world work for you. Over time, stocks have significantly outperformed inflation – as well as bonds. Yet  most active money managers have consistently failed to outperform. This is why we only use strategic Asset Class investments – which let markets  work for you by focusing on delivering market returns.


How We Know

Active money managers have a poor track record when it comes to outperforming the market reliably and predictably.

graphicInvestmentsPanelsActiveBeatIndex

Instead of trying to beat the market, Asset Class funds focus on capturing market rates of return

Source: Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA) 2014. Index used for comparison: US Equities — S&P 1500 Index; International — S&P 700 Index; Emerging Markets — S&P/IFCI Composite; US Fixed —Gov. Short, Global Fixed — Barclays Global Aggregate. Outperformance is based upon equal weight fund counts. Index returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. Past performance is not an indication of future results. More recent performance may alter these assessments or outcomes.

Concept Two - Part OnePut Science on Your Side

We Believe

Financial science gives us the knowledge and tools to address the "investment problem." Our Investment Committee builds portfolios with focused exposure to key “factors” of returns, such as company size, relative price (value), profitability and momentum. This factor exposure largely determines a portfolio's risk and return. Working with your advisor, we then recommend how much exposure to these factors is right for you.


How We Know

Great thinkers and economists, including our Investment Committee members, Dr. Harry Markowitz and Dr. Meir Statman, have provided us with powerful insights into how portfolios should be constructed.

graphicEconomists

We apply — and continuously test — academic research to address the investing problem

Concept Two - Part TwoPut Science on Your Side

We Believe

Financial science gives us the knowledge and tools to address the "investment problem." Our Investment Committee builds portfolios with focused exposure to key “factors” of returns, such as company size, relative price (value), profitability and momentum. This factor exposure largely determines a portfolio's risk and return. Working with your advisor, we then recommend how much exposure to these factors is right for you.


How We Know

Landmark research by Professors Ken French and Eugene Fama Sr., identified two equity risk factors — small companies and value companies — that investors should expect to be compensated for over the long term. Further research also identified additional factors of return, including profitability and momentum.

graphicInvestmentsPanelsRiskReturn

Greater potential risk = Greater expected long-term returns

The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal.

Concept Three - Part OneManage Risks

We Believe

Risk can't be eliminated, but it can be managed – even potentially reduced – through our prudent approach:

  • We diversify globally (almost 50% of world stock market value is non-U.S.)
  • We invest in thousands of securities to reduce company-specific risk
  • We combine Asset Classes that respond differently to various market conditions
  • We invest in high-quality, short-term bonds to provide income and help smooth out dramatic ups and downs

How We Know

Investing only in only one country means unnecessary risk as well as missing a world of potential opportunities.

graphicWorldMarketCap

Own Great Companies around the World

Source: Dimensional Fund Advsors. In US dollars. Market cap data is free-float adjusted from Bloomberg securities data. Many small nations not displayed. Totals may not equal 100% due to rounding. Past Performance is not indicative of future results. All investments involve risk. Foreign securities involve additional risks including foreign currency changes, taxes and different accounting and financial reporting methods.

Countries represented by their respective MSCI IMI(net div.). Indexes are unmanaged baskets of securities in which investors cannot directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio.

Concept Three - Part TwoManage Risks

We Believe

Risk can't be eliminated, but it can be managed – even potentially reduced – through our prudent approach:

  • We diversify globally (almost 50% of world stock market value is non-U.S.)
  • We invest in thousands of securities to reduce company-specific risk
  • We combine Asset Classes that respond differently to various market conditions
  • We invest in high-quality, short-term bonds to provide income and help smooth out dramatic ups and downs

How We Know

These Asset Class returns show no reliable pattern. But a globally-diversified portfolio (the black line representing 65% stocks/35% bonds) offers potentially more consistent returns with less risk. Our portfolios have 9 asset classes representing up to 10,000 securities in 45 countries and 35 currencies.

graphicInvestmentsPanelsAssetReturns

Smart diversification can help you stay on track

Source: Morningstar Direct 2015. Index representation as follows: U.S. Large Cap (S&P 500 Index), U.S. Value Stocks (Russell 1000 Value Index), U.S. Small Company Stocks (Russell 2000 Index), U.S. Real Estate Market (Dow Jones U.S. Select REIT Index), International Developed Value (MSCI World Ex USA Value Index (net div.)), International Small (MSCI World Ex USA Small (net div.)), Emerging Markets (MSCI Emerging Markets Index (net div)), Global Bonds (Citi WGBI 1-5Yr Hdg USD), US Bonds (BofA ML Corp & Govt 1-3 Yr TR)., 65/35 Index Mix: 2% Cash, 16% ST US Fixed Income, 17% Global Bonds, 15% US Large, 12% US Value, 8% US Small, 14% Intl Large Value, 7% Intl Small, 5% Emerging Markets Value, 4% US REITs; rebalanced annually. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Treasury notes are guaranteed as to repayment of principal and interest by the U.S. government. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Fixed income investments are subject to interest rate and credit risk. Emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. Real estate securities funds are subject to changes in economic conditions, credit risk and interest rate fluctuations. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution.

Concept FourInvest for the Long Term

We Believe

A long-term perspective is one of the most important ingredients of portfolio success. But the powerful emotions we experience when markets move up and down can get in our way. That's why we incorporate the latest behavioral research to help you make better decisions and stay on track. We also rebalance your portfolio periodically to keep it aligned with your goals. You don’t have to go it alone.  Work with an experienced advisor from our Network who has a legal and ethical duty to always put you first.


How We Know

Panic, fear and trying to outguess the market have led the average stock investor to underperform. the S&P 500 by almost 50%. This is where the guidance of your Financial Advisor can make all the difference.

graphicInvestorsUnderperform

Patience, discipline and your Financial Advisor can help you stay on track

Source: Average stock investor and average bond investor performances were used from a DALBAR study, Quantitative Analysis of Investor Behavior (QAIB), 03/2015. QAIB calculates investor returns as the change in assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms (above), two percentages are calculated: Total investor return rate for the period and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period. The fact that buy-and-hold has been a successful strategy in the past does not guarantee that it will continue to be successful in the future. S&P 500 returns do not take into consideration any fees.

  • Let Markets Work for You

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  • Put Science on Your Side

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  • Manage Risks

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  • Invest for the Long Term

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