We identify long-term trends, and we take advantage of these trends by investing our clients’ assets primarily in mutual funds or exchange traded funds (ETFs).
Based on the areas we want to invest in, we find what we believe are the best-performing ETFs and/or mutual funds that invest in those areas. Rather than diversifying very broadly and holding a large number of funds, we prefer to focus our investments in the strongest-performing areas and to hold only the strongest-performing funds we can find. The most important criteria we look at in choosing these funds are performance, volatility, and expense ratio.
All mutual funds and ETFs have an expense ratio, which impacts their performance over time. Many mutual funds have expense ratios higher than 1% per year. ETFs generally have much lower expense ratios than mutual funds, so we generally prefer to purchase low expense ratio, high liquidity ETFs to implement our strategy.
However, sometimes we are able to find outstanding mutual funds which have superior management and superior performance records combined with relatively low expense ratios. Finding such funds has been one of the keys to our success for many years.
We also carefully evaluate volatility in choosing our investments, and our ideal goal is to find ETFs or mutual funds with superior performance but relatively lower volatility compared to other funds investing in the same areas.
In taxable accounts, we strive to maximize tax efficiency. The ability, in taxable accounts, to accumulate long-term capital gains over long periods of time while deferring taxes is one of the keys to success in long-term investing.
In deciding what investments to make, our most important consideration is what is in our clients' best interest. Our only source of revenue is the management fees our clients pay us. We receive no financial benefit, direct or indirect, from fund companies or from any of the investments we purchase for clients.