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 consider your best interest from 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. 

Here are some core tenets of what we believe about investing:

  1. Understanding value is core to success: Ultimately, the most important factor with investing is understanding the value of assets. I strive to think about investments at the business level, not as pieces of paper in the Wall Street casino. By understanding the businesses we invest in, thinking like a corporate officer and acting like a business manager, we can find opportunities. Simply put, I am seeking to invest in companies that own undervalued assets and/or provide under appreciated growth. 
  2. Broad diversification does not work: Owning a little bit of everything is a sure way to participate in all of the risks of the markets. I look to avoid as many risks of long-term permanent loss as possible. Warren Buffett said that, “Wide diversification is only required when investors do not understand what they are doing.”  
  3. Mild diversification does work: I want our asset allocation to be invested in several promising areas in order to spread risks. However, unlike others who invest a bit in almost everything, we will try to avoid assets that we see as the riskiest or with least upside. 
  4. Market timing does not work: Trying to forecast the short-term movements of the markets is very difficult at best and fraught with high risk. I avoid market timing as I have never found a crystal ball that worked more than once or twice.
  5. Quantitative and technical analysis is a guidepost: I use quantitative and technical analysis of the markets and individual security price direction. In simplest terms, these are measurements of the supply and demand for certain assets. These measures can show us important trends to help us control risk and obtain good pricing on buys and sells. 
  6. Using volatility to your advantage: Most people see volatility as risk. I see it differently. Volatility means that people are acting emotionally and without regard for valuation in many cases. This is a prime time to make opportunistic trades, as well as, long-term investments.
  7. We sell losers: A loser is not defined solely by price action in the short-term. If my evaluation of a company changes for the negative, regardless of short-term price movements, I will sell the position. If an investment that I believe in falls in price, I will continue to average in via buying more, however, I will respect the price action and take the time to evaluate the asset again before committing new capital. Very often doing nothing and waiting out the market is the right approach. 
  8. We ride winners: Our biggest winners are also those that we own the longest. Many people think that taking a profit is a good idea when something has gone up in price. Unless there is a true over valuation, that is usually not true. As Peter Lynch, legendary manager at Fidelity Magellan said: “It only takes a handful of big winners to make a lifetime of investing worthwhile.” We are loath to sell our winners.
  9. We don’t trade much: I only trade within the guides I’ve laid out. I prefer to own assets throughout an entire investment cycle, which is usually about 3 to 7 years. I believe what Warren Buffett has said: “The stock market is designed to transfer money from the active to the patient.”

My view on diversification is not held by most financial people who sell products or those who are more “financial planner” than investment adviser. However, most of the best investors do share my view — or I should say, I have stolen their view.

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. 

In reality, most people, financial planners included, do not understand what diversification really is. My view is that diversification is not defined by asset class or holding, but rather, by risk factors. All assets that are affected by similar risk factors are correlated, therefore, those assets, no matter how many you own, do not offer adequate protection.

Most investors experienced this in 2008 when almost all asset classes declined at the same time. Diversification as practiced by most people failed. Only managing by risk factor can you truly find diversification. 

As a result of my view on diversification, there are times, for the sake of safety or opportunity, when we will not be diversified at all. For example, we have moved most  assets to cash or treasury holdings during times of excessive market risk. 

I try to pay special attention to Warren Buffett’s first two rules of investing: 

Rule No. 1: never lose money; rule No. 2: don’t forget rule No. 1.”

Buffett’s rules apply over full market cycles measured in multi-year time frames. Time frames measured in months or even a year or two are not terribly significant to long-term wealth accumulation. 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 weekly basis, you are not a good client candidate for me.

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)

What I Will Try To Do For You

In 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. We support each other’s research and challenge each other to find ideas that lower risk while allowing for return.

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 live your life to the fullest and build a legacy.

To have a talk about working together, contact me and then schedule a time for a call.