We believe that markets work, and as a result:
- Current asset prices reflect all available information and expectations.
- Current prices are therefore the best approximation of value.
- Active portfolio management (buying and selling individual securities in an attempt to out-guess or “beat the market”) is a losing proposition.
We believe and numerous academic studies have demonstrated that:
- Capital market returns are available to all.
- Market returns are the reward for taking risk.
- Investment returns are most effectively captured by investing in passively managed index and asset class funds.
We construct and manage portfolios guided by the following empirical facts:
- Asset allocation is the most important investment decision.
- Diversification within sub classes of stocks and bonds is an effective means of reducing risk and enhancing returns.
- Over time (but not all the time) stocks return more than bonds.
- Over time (but not all the time) small company stocks return more than large company stocks.
- Over time (but not all the time) “value” stocks return more than “growth” stocks.
- For stocks, the size and value effect exists in foreign, as well as domestic, markets.
If you would like to learn more, be sure to visit the Resources section of our website.