Smart Equity Investing Starts with Letting Go of the Wrong Habits
Stock picking, market timing, and sector rotation are tempting but persistently unsuccessful for most investors. We’ve built our entire equity approach around that reality.
We don't pick stocks — and that's the point
Our investment philosophy starts with a deep understanding of market efficiency. Because it’s very difficult to outperform the market through stock picking, market timing, and sector rotation, we don’t participate in those activities.
Instead, we remove individual stock selection from the process entirely. We use index and “factor-based” exchange-traded funds (ETFs) to build the stock portion of your portfolio. These investments give you broad diversification at very low cost, without the drag of a highly paid active manager trying (and usually failing) to beat the market.
We're not pure indexers, either
Using indexed vehicles doesn’t mean we’re passive in every sense. True indexing has its own problems.
Stocks can trade at aberrantly high valuation levels. The 1990s are an example of when that took place. When that happens, the market often produces lower future returns. Passive indexing in that environment can be insufficient to preserve long-term purchasing power, especially if you’re taking distributions to cover living expenses. This can persist for years, such as during the “lost decade” of the 2000s.
That’s where our factor-based approach comes in. Rather than riding whatever valuation level the market hands us, we tilt the equity allocation toward characteristics that have historically delivered stronger long-run returns.
ETFs: the right tool for the job
Exchange-traded funds are our preferred vehicle for stock market exposure for several reasons. They offer instant diversification across hundreds or thousands of holdings. Their costs are a fraction of what actively managed funds charge. And their structure makes them highly tax-efficient for taxable investors.
We find the ETFs that best represent the return profiles we’re targeting. That process includes careful evaluation of fees, liquidity, assets under management, and the manager’s ability to execute efficiently. Not all ETFs are created equal, and we do the work to find the ones that deliver what they promise.
Broadly diversified, risk-targeted, managed through thick and thin
Our stock portfolios are built to hold up across market cycles — not just the bull markets. We help clients establish broadly diversified, risk-targeted asset allocation plans and then manage them with discipline when markets get uncomfortable.
That last part matters more than most people realize. The biggest mistake investors make isn’t picking the wrong fund; it’s abandoning the right one when markets fall. Our job is to build a stock portfolio you can stick with, and to help you do exactly that.
Curious how we'd build a stock portfolio for your situation?
Frequently Asked Questions
Do you ever buy individual stocks?
Generally, no. We use broadly diversified ETFs rather than individual stocks for the stock portion of portfolios. Individual stock positions introduce concentration risk and are difficult to manage in a tax-efficient way. ETFs let us maintain targeted factor exposures across hundreds of holdings without those downsides.
What's wrong with just buying an S&P 500 index fund?
Nothing, necessarily. In fact, it’s far better than most alternatives. But a straight S&P 500 fund gives you whatever valuation level the market is currently trading at, with no tilt towards characteristics that have historically improved long-term outcomes. Our factor-based approach can do better than pure passive indexing over a full market cycle.
How do you decide how much of a portfolio to put in stocks?
Based on your time horizon, income needs, risk tolerance, and overall financial picture. We develop a risk-targeted asset allocation plan that reflects your specific situation — not a generic age-based formula. The right stock allocation is the one you can stay invested in through a significant market decline.
Disclaimer: Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns.