Investment Management

Our investment management approach is centered around three factors:

Optimal Decision Making

The four most valuable words in the English language may be “Buy low, sell high.” We all know this. But research paper after research paper shows that the average investor rarely follows this plan. In fact, the average mutual fund performance is between 2-4% per year higher than the average performance of the investors…in that same fund. In short, investors are the ones buying high and selling low – the opposite of what they should do. We can guarantee that all investors want to buy low and sell high, so why do the majority of them do just the opposite? This is what some call the “behavior gap,” and a competent advisor you trust can help you bridge it. Recovering just some behavior gap costs will more than pay for our fees.

PLC wealth management
PLC wealth management

Location Optimization

We manage our portfolios at the household level rather than account by account. This allows us to locate assets in accounts with different tax status for maximum tax efficiency. For instance, it is optimal to locate assets with the highest growth potential in a Roth IRA (keeping the growth tax free) or a taxable account (so the growth is taxed at capital gains rates rather than ordinary income rates). Likewise, income-oriented assets should go in a pre-tax accounts (i.e., IRA or 401k) as any future withdrawals will be taxed at ordinary income rates regardless of the asset. All of this maneuvering has been shown to add as much as 0.5%-1% per year in additional savings to a plan solely due to tax efficiency.

Strategic Rebalancing

We use the latest, cutting edge portfolio management technology to capture and highlight when your portfolio skews too far out of balance. This is reviewed on a daily basis to determine if there are any course corrections that need to be made to keep your portfolio in balance. This should not be a regular occurrence but can be expected as markets get volatile.

Market volatility shouldn’t scare you. It gives us the opportunity to try to buy low and sell high. Strategic rebalancing looks for the opportunity when certain asset classes gain or lose enough that they are beyond a certain target threshold.

When that occurs, we will skim off some of the gains in the portfolio in order to buy more of the asset classes that have declined the most. This brings the portfolio back into balance so you maintain the same target risk level, but it also enhances the total return of the portfolio over time through buying more of the assets classes when they go on sale.

The goal is to sell assets when they are expensive and buy assets when they go on sale…it’s just the smart thing to do. But, again, research has shown that most investors do not follow through with this. Strategic rebalancing can also add much to the total return of your plan, thus offsetting fees paid to an advisor.

PLC wealth management

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