Investment Management

Principles

Markets work. Capital markets do a good job of fairly pricing all available information and investor expectations about publicly traded securities.

Diversification is key. Comprehensive, global asset allocation can neutralize the risks specific to individual securities.

Risk and return are related. The compensation for taking increased levels of risk is the potential to earn greater returns.

Portfolio structure explains performance. The asset classes that comprise a portfolio and the risk levels of those asset classes are responsible for most of the variability of portfolio returns.

Investor Philosophy

You either believe the above is true or investing will be a costly and unsatisfying experience. Lack of faith makes it impossible to implement a plan.

A market return is yours for the taking, but you have to participate. That means being in the market for long periods of time. It takes patience.

People lose more money from their own behavior. A consistent and disciplined exposure to the market is necessary to get a market return. Poor discipline will undermine the best plan.

Faith, patience and discipline are required to make a plan and stick to it. It is the same with investing.

Portfolio Design

Your financial plan matches your resources to your goals. It tells us what return is required to make the plan work. The return is matched to an asset allocation  Other factors, such as risk tolerance and time constraints are factored in. The result is the basic exposure to stocks and bonds that we need to make the plan work.

Diversification is taking the required mix of stocks and bonds and splitting it into the right mix of stock and bond sectors that will give us the right historical return while lowering the portfolios price fluctuations as much as possible. For example, we would use large and small cap funds, as well as domestic and international. That is diversification.

Finally, we would pick funds for each of these sectors that are low cost, passive, and/or indexed. They will have low turnover and will reliably stay in the category that they belong.

This approach lets us focus on other things that matter – such as providing advice on major purchases, funding your grandchildren’s college educations, and designing tax-efficient wealth transfer and legacy strategies.

Asset Management

Stowe Financial Planning, LLC offers prudent administration of your investable assets with the goal being to achieve maximum risk/reward ratio. Simply put, our aim is to place your money in investments that provide optimal return on investment without undue risk. Through careful research, ongoing monitoring of the industry and personal attention to your portfolio, we believe we offer one of the finest asset management services available anywhere.

Stowe Financial Planning, LLC uses Fidelity Institutional Brokerage for custody of your portfolio. Their service is excellent. Stowe Financial Planning, LLC will provide quarterly reporting to complement Fidelity’s custodial reports and will meet to periodically rebalance the portfolio. All work on the portfolio is done with the client’s approval.

Fees

$0 to $1M is .7%

Over $1M is .5%

This fee does not include the initial financial planning fee, but does cover all ongoing planning and investment management costs.

Retainer

Some clients may wish to maintain their investment portfolio with a mutual fund company susch as Vanguard or they must keep it at their company’s 401k plan but they also would like to have a continued collaborative relationship with Stowe Financial Planning, LLC.  We can accommodate these clients with an annual renewable arrangement that covers their investment and planning needs.

This service is .15% to .25%.

From Dimensional Fund’s Website

 “Dimensional Fund Advisors manages mutual funds for long-term investors. One of the cornerstones of our approach is a client base committed to their investments through all market cycles, both good and bad. Buy-and-hold investors enable us to keep turnover and transaction costs low, which adds to their bottom line. We believe financial advisors play a vital role in educating investors about the financial science that drives this approach and in instilling the discipline required to benefit from it.

As a result, Dimensional does not offer funds directly to individual investors. Instead, we choose to make our funds available through a select group of fee-only advisors. Investment success begins with a properly diversified portfolio. Constructing such a portfolio is a complicated process that can benefit from the guidance of a qualified, professional advisor. In our view, independent advisors free from the conflicts associated with commission-based transactions are best positioned to assist individual investors in developing long-term investment solutions.”

For more on the role of the fiduciary and fee only planning, please see The Difference