Investments are the most fluid portion of a financial plan. Team Financial Strategies will spend ample time analyzing investments and judging the fit of an asset in a client’s portfolio. TFS will help clients stay current on market and economic activity while implementing, monitoring, and revising their investment portfolio.
TFS believes the successful investor is one who finds investments that are undervalued or out of favor while having solid prospects and fundamentals. Client’s portfolios are not set in a static asset allocation. Portfolios are diversified between various asset categories based on a risk/reward analysis.
TFS recognizes that fees play an important role in a client’s rate of return. Therefore, we will never invest a client’s money in load funds and will evaluate the cost benefit of a mutual funds annual expense ratio before investing. Some funds will have transaction fees depending on the fund family’s agreement with the custodian.
Diversification and Correlation
TFS believes that the correlation of assets in your portfolio is vital to diversification. Correlation is measured in the range of -1.0 to 1.0 and measures how an asset moves in relation to another asset in the portfolio. As expected, assets can be corrected in one of three general ways:
- negatively, or
- no correlation
If two funds have a correlation of 1.0, then as Fund A increases, Fund B increases at the same rate. At 1.0 they have a “perfect positive correlation”. As the scale slides closer to zero, they are less correlated to each other. At 0, there is no correlation between the two assets.
As the correlation falls into the negatives, the assets move in opposite directions. Those with a correlation of -1 have a “perfectly negative correlation” and therefore would entirely “hedge” out any gains or losses.
Why is This Important?
Over time and in various market cycles, investment correlations will vary. In analyzing risk, it is important to know if during one period or another you have the risk of either having too high positive or negative correlations in your investment portfolio.
We have two styles of management based on the needs and contract with the clients.
Wealth Management Portfolios: For our clients signed up for our “Wealth Management” service, we tailor their portfolio to their needs using investments from various asset classes including options for hedging and enhancing the portfolio. Our investment team considers Macro risks and the client’s advisors consider the individual risk reward profile of the client to build out and manage the individual portfolio.
Wealth Builder Portfolios: For our clients signed up for our “Wealth Builder” service our investment team focuses on building portfolios for long term growth while still taking into consideration the clients risk/reward profile. For this service our investment team manages models by selecting mutual funds and percentages of a portfolio to be invested in each fund for a risk reward profile. Then advisors can assign the investments to each client and the portfolio will remain invested and rebalanced based on our team’s parameters on a regular basis.
Active vs Passive: Our philosophy leans toward active management but we feel that this should not be a choice of style that an investor must pick. We believe there are definitely times and opportunities where active managers provide a lot of value to a portfolio in various areas of the market and there are also times where passively investing in an index is difficult to beat. With that said, even deciding the allocation of passive investments is an active management decision. It is also an active decision to keep some money in cash. Investing involves decision making. Our goal is to help the client make the best decision possible for their portfolio at a given time based on the information we have for them.
Our team of professionals spans many years of experience in a multitude of areas that are covered in wealth management. For our wealth management clients, we want to help you look at the areas of your financial life where we can make the most difference. Therefore, we take a comprehensive approach looking into various areas of your finances and making recommendations in areas such as tax planning, risk management, generational planning, and retirement planning strategies.
Have you been appointed as the Executor/Executrix of an estate? Our team has assisted clients with the settlement of an estate on many occasions. This area is one that can have many hurdles and pitfalls. Our experience in assisting clients can be used to your benefit. If you are the executor of an estate, we can work with you through this process to make sure it is done in a way that can save you time, money and stress. If you would like to discuss these services with our team, click here to make an appointment and put “Estate Assistance” in the “Additional background information” field.