As a starting point to describe our strategy, we believe most portfolio managers have a very difficult time beating a portfolio of index funds. Index funds are liquid, low cost, and tax efficient. Numerous studies have proven that few managers can pick the right stocks or right bonds consistently to beat their index or benchmark. We believe there is more value in focusing on “the mix” of asset classes than from stock picking. We build our client’s iFolios with globally diversified index funds – usually 8 to 15 different index funds; one for each of the asset classes we want to include in your portfolio. You might have an index fund, for example, representing U.S. Short Term Bonds, U.S. Large company stocks, European company stocks, Commodities, International Real Estate, and so on. After we’ve determined “what” goes into the portfolio, we’ll establish “how much” of each index fund. Importantly, we establish an “allocation range” for each index fund and not just a “static target” to allow us to seek both growth & protection.
Once we’ve built your globally diversified iFolios for you, we have to manage it over time. We apply our proprietary trend following signal to track the long-term trend of each of your index funds. When an index fund is trending higher, we’ll be fully invested within your allocation range to fully capture growth and income. On occasion, an index fund will be trending lower, and we’ll trim back or sell that holding to the low end of your allocation range to provide protection from loss. It’s a systematic process that eliminates guessing and indecision.
Reporting & feedback
Each quarter, we’ll review your goals and concerns, make sure you still have the right iFolios model for you, and review our portfolio management of your portfolio and its performance. We want to continually ensure that what we’re doing for you is the “right” thing, that we’re doing a good job of it, and that it’s working for you to provide the growth and income you desire, within the risk tolerance you can handle.