There’s a tremendous amount of noise in the investment world about the best ways to invest. Some financial advisors promise hot “stock tips,” returns that supposedly beat the market year after year, and secret insights to make you lots of money without a lot of risk.
That’s not D&Y.
Instead, we follow an evidence-based approach and focus on the factors we can control. Here’s what we believe:
Your goals come first. What is the purpose of your wealth? Are you saving for a new house? Supporting yourself in retirement? Or are you building a legacy to leave to your heirs? Your goals shape how we invest. One size does not fit all in terms of portfolios. Instead, we build a custom portfolio that’s tailored to you.
Market timing doesn’t work. Research shows that it’s extremely difficult to time the market successfully. To do so, market timers must accurately make two decisions:
Have you ever noticed that active traders use the market as their benchmark for performance? They’re forever trying to beat the benchmark. But few do that consistently. And figuring out who is going to be among those few? Well, that’s akin to clairvoyance. (For more information, see the Persistence Scorecard, published by S&P Dow Jones Indices.) We don’t believe anybody has a crystal ball, so we don’t time the markets.
Diversification is your friend. Stories abound with news of people picking one hot stock and riding it to the top. But the reality is that there are just as many—or even more—losers in that game. How do you know what the winners will be? You don’t. That’s why we believe in diversifying your portfolio.
Risk and returns are related. To get higher returns, you do have to take some risk. But how do you know what’s a smart risk to take? And how do you avoid taking on too much risk for your situation? We can help you feel comfortable with the appropriate risk levels for your long and short terms goals.
Asset allocation is crucial. How much do you want to hold in stocks versus bonds? How much should you have in cash? A good financial advisor will design a strategy that thoughtfully answers these questions for your specific situation.
Rebalancing should not be emotional. As humans, we are emotional beings. But gut feel is rarely a good guide for investment decisions. “Buying low” and “selling high” in practice can feel hard since you are buying while the market drops and selling while it climbs. If you manage your portfolio based on emotion instead of strategy, you can erode your returns over time. At D&Y, we serve as your objective partner, monitoring your portfolio daily and buying and selling to bring everything back in line with your plan.
Minimizing costs is key. One sure way to keep more of your hard-earned money is to minimize the various costs you incur. This means keeping an eye on:
And speaking of costs…
Taxes matter. Tax law is complicated. Part of our job is to make sure that you’re paying as little taxes as possible on your investments. We use several strategies including:
There’s no free lunch. If something sounds too good to be true, it probably is. Returns that supposedly beat the market tend not to hold up over time. Returns that seem high tend to be linked to much higher risk investments and may have higher fees. We believe in evaluating all returns after fees to get a true picture of performance.