My investment philosophy deviates significantly from most other traditional financial planners. Before working with me it is important that you understand the differences in my approach. 

I am a fee-only Registered Investment Adviser. I do not charge commissions. I act as a fiduciary with your best interest as the mandate for providing services. I analyze based upon a long-term viewpoint and often do not believe what others believe. I am contrarian by nature, and believe that about 4 out of 5 investment people “get it wrong” — statistics bear that out. 

Usually, the mass media, public at large and too many financial advisers are most interested in “hot” or “in the news” ideas which leads them to be emotional and unfocused. I seek a less emotional and more analytic approach to investing. Very often I will want to buy what others are selling, and sell what others are buying. This approach allows us to ebb and flow into “buy low” and “sell high” opportunities. 

I use a simple to understand asset allocation approach derived from the book The Intelligent Investor written by Benjamin Graham who was Warren Buffett’s mentor.

Asset allocation and diversification are not the same thing. Within an asset allocation you might be diversified or might not. It depends on whether the assets you hold are essentially similar or have important differences that mitigate risk. So far this century, correlation of asset classes have been relatively high. That means that many asset classes, for example, domestic stocks, developed international stocks, emerging markets stocks, currencies, corporate bonds, emerging markets bonds, commodities, etc… have tended to move in the same direction at the same time. This has made getting the theoretical benefit of diversification more difficult.

In 2008 almost all asset classes declined at the same time exposing so called “diversified” portfolios to crater. Diversification as practiced by most people failed. Only managing by risk factor can you truly find diversification. In the case of the run up to the financial crisis, U.S. Treasuries, some agency bonds and cash were the only real hiding places.

There is no telling when asset class relationships might change. Thus, having an asset allocation exposed to several different asset classes with different risk factors is the key element of getting diversification benefits. In general, you need exposure to far fewer asset classes to get the benefit of diversification than most financial professionals expose you to. 

Please see my special report here: A Simple and Effective Approach to Asset Allocation with a Margin of Safety.

I employ what I call my “Core 4″ method for selecting the investments that go into our asset allocation. This method, largely borrowed and modified from other great investors includes these four steps to finding investments:

  1. Top down analysis to find the big secular trends within the global economy.
  2. Consideration of government and central bank impact on investment themes over various time frames.
  3. Bottom up analysis of true value of companies and sectors of the economy versus current pricing of assets (stocks and bonds generally) in the markets.
  4. Price trend analysis using various quantitative and technical indicators of asset price strength and direction.

Please see my special report here: Core 4 Investing for Better Returns with a Margin of Safety.

You will have noticed that I used the term “margin of safety” twice already. This is a the core element underlying all investing. It simply is not true that more risk leads to more returns. The reality is that keeping risk as low as possible within a strategy is what leads to better returns. So, when I invest in stocks, which are inherently risky, I look for ways to invest that will reduce that risk. My “Core 4″ analysis is at the heart of that endeavor.

Margin of safety is a favorite concept of Warren Buffett: “Rule No. 1: never lose money; rule No. 2: don’t forget rule No. 1.” 

Of course never losing money is impossible. I try my best to manage risk, knowing I can never do it perfectly. As Packer legend Vince Lombardi said: “Gentlemen, we will chase perfection, and we will chase it relentlessly, knowing all the while we can never attain it. But along the way, we shall catch excellence.” That is my goal with investing, the pursuit of perfection with the hope I am excellent.

Here are some core things I have learned about investing over the years: 

  • Understanding the big trends can protect us from stubborn mistakes of holding onto yesterday’s investments.
  • Appreciating the impact of government and central bank actions on the economy and investments protects us from mistakes of ideology.
  • Understanding the true value of a company is at the heart of determining what is a good investment. 
  • Being educated about the cyclical nature of most markets makes slow handed ebb and flow trading easier to do.
  • Respecting price trends allows us to take advantage of mistakes inherent in the mass psychology of the markets, as well as, sometimes signaling that there is more information to be had about an asset which we might be overlooking.
  • Broad diversification does not work, light diversification within a well thought out asset allocation does.
  • Volatility in the markets should be looked at as opportunities to buy assets that we like or sell assets that we feel are fully priced.
  • Selling small losing positions before they become big losing positions is as important a concept as buying more of an asset when it has cheapened, you have to look at each case individually. 
  • Riding our winners is usually a better idea than taking profits. As Peter Lynch, legendary manager at Fidelity Magellan said: “It only takes a handful of big winners to make a lifetime of investing worthwhile.” 
  • Slow handed trading is better than frequent trading. 

Managing Money for You

I have learned that most prospective clients that contact me have long thought that there is a flaw in the way they are told to invest by the financial industry and press. I seek to be validation for and a haven for those people.

My time frame for investment is usually 3 to 7 years (opportunistic trades are shorter). If you are looking at your account balance on a daily or even weekly basis, you are not a good client candidate for me and should probably be managing your money yourself using a couple investment services (I offer one).

I do not try to be a jack of all trades. I focus on what I do best. Sometimes, even with my very deep bench of research and analysis services, I can not get comfortable with a prospective investment idea. When that happens, I walk away. Sometimes we are walking away from a great opportunity. Sometimes we are walking away from a big risk. 

“We just throw some decisions into the ‘too hard’ file and go onto others.”  

Charlie Munger (Buffett’s partner at Berkshire Hathaway)

When managing money, I look to the great investors for guidance and direction, not the financial industry sales machine. I partner and consult with several other top investment professionals, as well as, subscribe to multiple research services to find the investment ideas in my pursuit of unattainable perfection.

My offer to you, is that we will do my best to be your funnel for finding the right investments for your portfolio, so that you can protect and grow your financial freedom, live your life to the fullest and build a legacy.

To talk about working together, please contact me and then set-up a free initial call.