Our Investment Philosophy

“When in the midst of historic financial and economic turmoil, it is easy to forget that we have been here before. There have been many times in history, which were accompanied by significant amounts of uncertainty and fear. All these periods have something to teach us about how to prudently respond in times of crisis. Besides having a financial game plan and sound advice, it is equally crucial to have some understanding and perspective on investing issues in challenging times.”

Uncharted Territory – It is our view that risk management in portfolio construction is far more important than potential returns that a specific strategy might generate. It is not possible to remove all risks since it is not possible to predict or model all potential outcomes. Portfolios are, therefore, constructed to minimize risks based on potential market responses which occur most of the time.

Systematic Risk - Investment risk comes in two main flavors, non-systemic and systemic. Non-systemic risk is the risk inherent in investing in a given company and depends on its business model, management skill and the like. Systemic risk refers to factors that affect all comparable investments and does not depend on the fortunes of any one company. In our opinion, when in the middle of one of these financial “tsunami” events, almost all investment strategies, active or passive, fail miserably to manage the risk involved.

Secular Bear and Bull Markets – It is our belief that we are in the midst of a secular bear market containing unique investment challenges. In this type of market, low P/Es alone do not necessarily provide good investment opportunities.

Active vs. Passive Management – Investment strategies may be categorized as either passive or active. Understanding these differences and making the right choices are especially important in a challenging investment environment such as exists today.

Hedging - Hedging strategies may be beneficial in reducing portfolio risks but are complicated and should only be implemented by skilled managers. It’s important to be clear that hedging is not a risky strategy but a ‘risk reduction’ strategy. Hedging in our opinion should only be used as a risk reduction strategy!

Equity Risk Premium - In times like these, we believe it is prudent to be flexible in your investment approach and strategy. Although times like these are very stressful on investors, they have presented historic opportunities for wealth creation for those who had the foresight and courage to take advantage of these opportunities.