Investment Management Services in San Francisco

What is Investment Management?

Ever stop to ask yourself why you own some of the investments you do? Do you monitor them periodically? What is your investment mix, i.e. the percentage of each major category of investment (cash, bonds, stocks, real estate, etc.) in your portfolio? Why does your investment mix matter? Can you just set it and forget it?

To get to those answers we often need to start with a basic question; “What is my money for?” Perhaps your answer is as straightforward as “for income in retirement”. You may want to maximize your charitable giving, or to leave something to loved ones once you’re gone.

Understanding the specific purposes you have in mind for your funds helps us determine your risk level. We strive to tailor your investments to your needs and assume only as much risk as is appropriate for your financial goals.

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Our Investment Philosophy

Here are some of the basics of our investment philosophy:

Diversify Globally

While we most often think of stocks and bonds as the main categories of investment, there are many categories within each of those. We want to be broadly diversified across the spectrum of possible investment opportunities and invest in categories that don’t all move the same direction at once.

Reduce or Avoid Emotional Decisions

This is the biggest risk most investors face. We naturally gravitate toward taking action when we’re most emotionally charged. That’s how some people might decide to sell their investments at the bottom of a nasty bear market. They just can’t take the pain of another down day in their portfolio. A sound investment mix can keep you in the game when emotions are urging you to act in unwise ways.

The number of risky assets you own (think stocks) determines not only how much growth potential you have, but also what kind of downside your portfolio could experience in a bear market. Settling on the amount of risk you can afford (and stomach!) is key for your long term financial health. This investment mix (also known as asset allocation) discussion is one of the most important we have with clients.

Another way we reduce emotional input is to use indexes as our primary investment tool. The preponderance of studies show that a fund’s assignment of portfolio managers to their accounts (often referred to as “active management”) fail to add value to the investment selection process. That is to say they are not worth the fees they charge for their services. Thus the next tenet of our investment philosophy…

Keep Expenses Low

We use only indexed based Exchange Traded Funds (ETFs) in our investment portfolios. These types of investments have become hugely popular over the years and they number in the thousands at this point. We stick to classes of investments which are tried and true and whose expenses are low. This means more return for our clients over the years!

Manage Taxes

As we make investment decisions, we need to be conscious of capital gains and investment income. Which investments are best suited to retirement accounts, and which are best suited to taxable accounts? As part of a charitable gifting strategy, can we take an oversized, low basis position to manage gains? Loss harvesting needs to be part of the process each and every year.

Rebalance Efficiently

This speaks to the question, “Can’t we just set our asset mix and forget it?” Market forces change the investment mix over time. When a position becomes overweight, due to appreciation, it can change the level of risk. Given that your asset mix reflects how much risk you are willing to take, a systematic rebalancing strategy can add value to your bottom line over time.

Rebalancing is the way we keep your investment mix on target and ensure that you don’t take more risk than is warranted.

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Investment Management Fees

The fees paid for investment management have become a hot topic. Clearly the less money you pay in fees and taxes, the more you keep in your portfolio. Many people are paying fees and aren’t aware of it. If you have a 401K, you pay fees – not just on each mutual fund you hold, but also administrative fees that lower your return. In this instance, you are paying fees without the benefit of personal service.

We are in agreement that lower fees are better. However, paying to have your money managed can be worth every penny. People who have spent years accumulating their nest egg will want to avoid costly mistakes that could jeopardize their future. Many are daunted by the responsibility that comes with managing their life savings when it is not their area of expertise.

It’s difficult to put a price on piece of mind, and we’re happy to discuss our Investment Management fees with you at any time if you have any questions. Hiring a financial advisor may be the most important step you take to having a secure financial future. Contact us today for a complimentary session to discuss your investment management options.

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