Investment Philosophy

What We Believe


We believe that growing and preserving capital is a byproduct of successful investing, not the goal.

We believe in intellectual honesty and practice what can be defined as “Evidence Based Investing.” Everyone has ideas, and while all ideas are created equal (in theory), not all ideas are equal (in reality). We eagerly and openly welcome ideas, but we also believe in testing them before taking action. In letting go of fear, greed, pessimism, optimism, narrative, and ego, we embrace intellectual honesty, academia, and realism and go where the evidence tells us to go. So, what does the evidence say?

The evidence says:

- The past is a reference point to understand the behavior of investments and to set reasonable expectations going forward. The past cannot predict the future, so we shouldn’t use it as such. The future is full of unknowns and we should embrace this.

- Markets are efficient and we should trust their accuracy. There is an enormous body of evidence that supports the belief that current market prices reflect all known information. This evidence suggests that because markets are efficient, we cannot get ahead of the news before it happens and produce “market beating” returns. We don’t need to beat the market to achieve extraordinary results, and most people don’t need to beat the market in order to achieve their vision and financial goals.

- Do not chase returns because it doesn’t work, and it is usually detrimental to achieving the results you need. This is a subcategory of the belief that markets are efficient. Whatever happened in the past has already happened, and buying the past thinking that it will repeat itself in the future is a recipe for disaster. Morningstar as well as others have published a number of studies of investor returns that demonstrate this to be true. What has been discovered is that an overwhelming majority of investors drastically under perform the markets, and the single biggest reason is moving assets to an investment that already performed well in hopes that it will repeat itself consistently in the future. Ie: Chasing returns. The cost of this is not small. It’s multiple percentage points on average per year. We do not chase returns because it is costly, and we do not believe in practicing any behavior that is costly for our clients.

- Efficient portfolio design will provide the best returns possible relative to the amount of risk (volatility) that your investment portfolio is exposed to, while doing so in a low-cost and tax-efficient manner. Some people need growth, some need stability, and some need a balance of both. When building your investment portfolio, we do so in the most efficient manner possible. We select investments based on their track record of capturing the returns of the markets they are exposed to efficiently and at the lowest cost possible.

- Maintain your portfolio’s balance as it is the best way to achieve the results you need at a pace that is comfortable for you. Does this mean rebalancing? Yes! Is this automatic? Not necessarily. The original design of your portfolio is based on your plan and what you need to accomplish your goals, not predictions about the direction of the market. As such, the original design of your portfolio should be maintained as closely as possible unless something changes in your plan. However, investments don’t move up and down at the same time or same interval, which means that your investment allocation will not be “static” or “fixed.” Your portfolio is built with a certain degree of flexibility that allows your investments to do what they need to do. We use dividends, interest, and deposits to maintain your original portfolio design, but if things get too far out of balance then we will automatically reset the portfolio to its original design in the most cost effective and tax-efficient way possible.

- Diversify your investments across different asset classes and areas of the global economy, and reduce correlation when possible. Most people think of this concept as “not putting all of your eggs in one basket.” In its most simple form this is basically true, but it’s more than that. The evidence suggests that the best way to diversify your investments is to own a mix of investments that spreads out what you own with where you own it, as well as owning investments that do not have a direct relationship to each other. This means that no single concentration exists within your investment portfolio, so no single stock or bond can impact you adversely over the long run. Diversification is your best friend, so give him a giant hug and never let him go.

- Cost reduction is important to achieving the best results possible. Paying attention to the expenses, tax exposure, and tax structure related to your investments can make a significant impact over time. We are intentional about this because it is what’s best for you.

- Ignore opinions and resist the urge to make decisions based on emotion, and your investments will be more successful than if you don’t. We all have opinions, but facts and evidence are what matter the most. Emotions are a valuable part of the human experience, and they exist to inform us of various things, but because they are temporary, making decisions based upon them can have long-term negative ramifications. In summary, turn off the TV! Even the financial media should be largely ignored.

- Working with an advisor who is putting your interests first is the best path to success. Vanguard did a comprehensive study of investors who work with an advisor and investors who don’t. They called it the “Advisor’s Alpha,” and they uncovered various forms of value that a professional advisor brings to the table. They also found that investors who work closely with a professional advisor drastically outperform those who don’t. Please feel free to read either the short version or the long version of the study.

So that’s the big picture behind what we mean when we say “Evidence Based Investing.” It is intellectually honest because it leaves ego and narrative at the door and examines what the evidence suggests to be true. We live in an era of constant new information, and as new information is gathered, we must be flexible and adapt to what the information indicates is best and what is true. This does not mean chasing shiny new things or fads. This means taking an honest assessment of what the information collectively says and allowing our actions to reflect the body of evidence. There are many other ways to approach finances. Trading, betting, guessing, predicting the future, chasing returns, self-directing, and making emotional decisions is what we refer to as “Primitive Investing.” This approach has been proven to be costly, so we avoid it at every turn and only do what is best for you.