Investing
Implementation
How can we help you build a custom portfolio based
on passive asset class investing?
A Focus Asset representative would be happy to discuss
the details related to your unique needs when you contact
us. Following is a summary of the key building blocks
we use:
Step
One
Establish a relationship with Focus Asset Asset
Management as your trusted, fee-only registered
investment advisor |
Step
Two
Learn how passive asset class
investing helps you achieve your financial objectives,
define your personal investment policy, based upon
your risk profile. |
Step
Three
Construct your portfolio |
Step
Four
Rebalance/maintain
the portfolio |
Step
Five
Provide ongoing
education; help them adjust to major life changes;
and help them stay the course and manage expectations,
so they can enjoy life! |
Step
One: Establish a relationship
as their trusted, fee-only investment advisor
Step
Two: Learn how passive
asset class investing helps you achieve your financial
objectives; define your personal investment policy based
upon your risk profile
The better you understand the key factors
that contribute to or detract from investment returns,
the greater your odds are for enjoying a successful
investment experience. Focus Asset provides ongoing education
and advice, so you can more easily make informed decisions
about a policy that makes sense for you.
For example, volumes of research have indicated that
you can expect to be compensated with a risk premium
when you incorporate riskier asset classes within your
portfolio. But how much risk is too much risk?
• |
Your ability
to take risk - When do you plan to spend your assets?
|
• |
Your willingness
to take risk - How well will you be able to "stay
the course" when the market is doing poorly
or when your portfolio doesn't resemble standard
market indices such as the S&P 500? |
• |
Your need to take
risk - How are you doing so far? If you're already
near or at your objectives, don't risk losing them.
|
• |
What is most important
to you - For example, if you are not by nature a
risk-taker, but your need to accept risk is high,
your Focus Asset advisor can help you assess how
to address this conflict. |
Step Three:
Construct the portfolio
The advantage of accepting portfolio risk
as part of your personal investment policy is its expected
premiums. A disadvantage of risk is the volatility it
can create in your portfolio (which can tempt you to
abandon your carefully designed investment policy).
Diversification is the key to managing
volatility.
Based on your risk profile, your Focus Asset advisor
helps you construct a globally diversified portfolio
that contains an appropriate measure of some or all
of the following asset classes:
• |
Stocks
of domestic and international companies |
• |
Stocks of small, large, distressed
and glamour companies (small-cap, large-cap, value
and growth) |
• |
Fixed income |
• |
Additional asset classes such as
emerging market stocks, real estate and commodities
|
For investing in equity (stock) asset classes, you
can typically turn to mutual funds that best capture
these primary characteristics:
• |
Passively
managed - tracking an asset class or index rather
than attempting to pick winning securities or time
future market movements |
• |
Low-cost |
• |
Tax efficient - for taxable accounts
|
For fixed income investing,
you can incorporate funds with similar characteristics.
Or your Focus Asset advisor may suggest the construction
of a custom bond portfolio based strictly on high-quality
individual bonds structured to meet your income flow
and/or risk management needs.
Step Four: Rebalance/maintain
your portfolio; periodically assess your objectives
and determine when carefully planned restructuring may
make sense
Over time, a properly constructed, diversified portfolio
is likely to move out of balance as each asset class
you own performs better or worse than the rest of your
holdings. When appropriate, your Focus Asset advisor
helps you restore your portfolio to its original asset
allocations and risk profile.
Rebalancing has the added advantage of implementing
a "buy low and sell high" discipline when
you sell your recent outperforming (overweight) asset
classes and purchase recent underperforming (underweight)
asset classes. But transaction costs and the potential
tax impact must be considered as part of the process,
so consider having Focus Asset help you incorporate
the following strategies:
• |
Rebalancing
with existing holdings only when significant adjustments
are needed |
• |
Taking advantage of new assets to
rebalance whenever possible |
• |
Implementing tax-management techniques
such as rebalancing within tax-deferred accounts,
tax-loss harvesting, and avoiding short-term capital
gains. |
Beyond periodic rebalancing there also may be times
when major life changes cause you to reassess your guiding
objectives. Events such as births, deaths, marriage,
divorce, career changes or retirement may require you
to revisit your original financial objectives and risk
profile (your willingness, ability and need to accept
risk), which may in turn result in a need to adjust
your plans and/or reallocate your portfolio.
Focus Asset can assist you throughout your relationship
with us in determining when such changes may make sense
(and when they may not), and how to implement them logically,
cost-effectively and with tax considerations in mind.
Step Five: Enjoy
your portfolio!
Enjoying life. There's an ingredient that is too often
overlooked in the serious world of financial services.
Yet we cannot overemphasize that the primary objective
of investing is not just to accumulate wealth, but rather
to achieve your life's goals. That is why your and your
family's lifelong dreams and visions remain an integral
part of our investment advice to you every step of the
way.
Whether your goals include achieving a
comfortable retirement, seeking higher education for
your children, traveling around the world, leaving a
substantial legacy, or pursuing favorite hobbies, our
goals are aligned with yours.
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