asset management assocates
Private Portfolio Management

   


 

Our primary business is building a portfolio for a client and adjusting that portfolio over time. There are plenty of stock pickers in the investment world. It is our job to find the best stock pickers and put them to work for our clients. We also go beyond stocks and utilize many market sectors and investment techniques that have proven themselves over the years. By combining these proven resources we create a low cost, diversified portfolio that is easy to adjust and understand. Each of the  steps below adds value to performance and increases the client's comfort level.

Ten Steps we use to build a Solid Portfolio:

  1. Get to know our client.
  2. Use well established investments.
  3. Select high quality custodial firms.
  4. Find qualified sub-contractors.
  5. Maintain a low cost structure.
  6. Maintain a high degree of liquidity.
  7. De-emphasize market timing.
  8. Diversify accross markets and investments using managed funds, unmanaged indexes and individual issues.
  9. Use market fluctuations to our advantage.
  10. Maintain transaction records.

1. Get to know our client. 

The portfolios we handle are all unique. This is because each client is unique. We have to work closely with each client to review their objectives, make sure that we are on the right track and make adjustments if necessary. Knowing the client's personal make up is important to us and is also important to the client. 

2. Use well established investments.

Most of our clients invest hard earned money with us. They want to make a good return and sleep at night. We are not in the business of speculating on the market and looking for big returns. We want to do better than the bank and better than inflation and add to that as much as we can without putting the overall objective in jeopardy. Beyond that, we ask the client how they want to relate to the markets and try to make them understand that as we try to outperform the markets we are adding more volatility (or more risk) to their portfolio. In short I have found over the past 20 years that regardless of how aggressive investors like to be, most can’t stand losing money. For this reason we like to be a bit more conservative and as we get to know the client and build that relationship, we could take on more risk only if we are convinced the client understands the scenario. Solid investments generate very solid returns and over time, the compounding of several percentage points over the risk free treasury bill returns puts a client well ahead of their objectives.

3. Select high quality custodial firms.

The independent fee-only advisor is the most sought after client of the largest brokerage firms. Investment firms, such as Charles Schwab and T.D. Ameritrade, offer their independent advisors services they provide to only their largest customers. This gives the client the benefit of having a small advisor with the resources of the largest institutions. Although we as advisors are not locked into any one brokerage or investment firm, we select the ones that we feel are providing the best services.

4. Find qualified sub-contractors.

Using a managed mutual fund or Exchange Traded Index is like finding a sub-contractor to do a job for you. When we use managers, we look for the best. This could be a manager that is an expert in convertible bonds or a specialist in low quality junk bonds. It could be an expert in  small cap stocks, European stocks, Italian stocks or international bonds. There are also speciatlists in energy, health, computer software and alternative energy.

By owning a managed fund, an index fund, an exchange trade fund or any other set of stocks, we eliminate the risk associated with owning one company. We now only have to deal with the risk that is associated with that sector or market.

In short, we act as a general contractor and hire the best portfolio managers to run pieces of your portfolio. We have the ability to hire and fire these managers instantly with little or no transaction costs. We also monitor their performance to be sure that we have the best people working for you. Over the years we have moved from using "managed" mutual funds to lower cost Exchange Traded indexes.  We have also integrated individual stock holdings into the portfolio.  A bulk of an account does rely on "Asset Allocation" via indexing as opposed to stock picking.
 
 
5. Maintain a low cost structure.
 
The concept of “you get what you pay for” does not hold true in the investment industry. One of the foremost advocates of low cost investing is the Vanguard Group. To learn more about their philosophy of how costs effect investing you could explore the website: Vanguard.com . Basically, Vanguard feels that costs eat into returns and that the additional return you get by adding costs to a portfolio diminishes very rapidly. For this reason, an investor has to keep their overall cost structure low. We adhere to this philosophy and try to make sure that the we are truly adding value with any incremental fees that the client is paying.

It is very inexpensive to buy a batch of stocks or low cost funds and sit on them. Unfortunately, things change and not everything is what it seems. There is a value to monitoring and making adustments to a portfolio. That is the value of an advisory service.

6. Maintain a high degree of liquidity.
 
Things change. Many financial advisors or planners select a set of investments and drop a client into that set of investments in one afternoon. Although these may actually be excellent choices at the moment, things change. In this financial world things change very rapidly. The economy changes, managers change, philosophies change, people's needs change. There are mergers, acquisitions, spin-offs and consolidations. To keep up with these changes you have to be in a position to adjust a portfolio. And you have to do this at a reasonable cost. If your B share mutual fund (see mutual funds) is merged into another fund and you want to cut back half of it – and there is a 4% redemption fee to do so, it becomes too costly to make changes. We believe that liquidity is important and we want to be able to adjust a portfolio easily and quickly. 
 
7. De-emphasize market timing.
 
No one can time the market. There have been tons of financial gurus that have timed the market right. A few years later, they are wrong and they disappear. Investing is not about market timing. That being said, we have to look at real trends in the markets and how those trends are taking shape. We know that all markets travel in cycles. We do not know the amplitude or the duration of those cycles. We could make an educated guess as to whether we are closer to the top or closer to the bottom but rather than speculate, we emphasize diversification. 


8. Diversify.
 
There has been an enormous amount of information written about diversification and everyone talks about it. When building a portfolio, we like to identify the risk associated with each holding of that portfolio. We also like to understand the relationship between one segment and another. If energy prices go through the roof, it could hurt  the rest of the economy and put downward pressure on the general stock market. So, by owning some energy, the returns on that sector will help offset the losses on the holdings in the S&P 500. So, rather than getting rid of all stocks we prefer to “hedge” our bets. There are hundreds of sectors and market classes and the relationships between them actually change over time. Without over-diversifying we try to control risk and obtain more stable returns.

9. Use market fluctuations to our advantage. 

Markets fluctuate and we never know if today is a good day to buy or not. We do know that all markets run through cycles and over time markets tend to inflate. For this reason we try to invest over time. We try to use the natural market fluctuations as an advantage to improve long term results. We also know that a slightly higher return compounded over time generates great results. This means time is on our side. Rather than looking for huge gains over short periods, we look for small gains that compound over time. It works.
 
10. Maintain transactions records. 

Finally, if you don’t know what you own, when you bought it, what you paid for it, and what the cost basis is, then it becomes difficult to make decisions. We do all of this for our clients and keep them informed with our “snapshot” quarterly consolidated report that tells them in simple terms what they have. We also maintain a log of all their transactions and dividends and can provide tax information when required. One of the best things we do is to show, in simple dollars and sense, what a client owns and what the value of their entire portfolio is worth.

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