Our investment approach rests on six interconnected principles. Together they guide how we build portfolios for our clients — how we allocate capital, how we select investments, and how we manage portfolios over time. No single principle stands alone; our work with clients reflects all six applied in balance.
1. Diversify
Asset allocation — the diversification of a portfolio across asset classes and sub-asset classes — is the first and most important investment decision.
An appropriate allocation across stocks, bonds, cash, and alternative investments (such as real estate and other real assets) determines most of a portfolio’s long-term return and risk. The right allocation targets a return sufficient to meet the investor’s goals, with a level of risk consistent with the investor’s ability and willingness to bear it.
Within each asset class, we further diversify across sub-asset classes — for example, value versus growth, large-cap versus small-cap, or U.S. versus international. Sub-asset classes rarely move together, so holding several reduces reliance on any one sub-asset class. In the classic phrase: multiple baskets, with multiple eggs in each basket.
A portfolio whose risk level is appropriate for the investor also supports better investor behavior. When risk is well matched, investors are less likely to abandon the plan under market stress — and one of the most consistent findings in investor-behavior research is that the average investor underperforms the average mutual fund over time, because of precisely these abandonment decisions.
2. Be Both Strategic and Tactical
A long-term strategic allocation provides the foundation; modest tactical adjustments respond to meaningful short-term dislocations.
Our strategic allocation is based on long-term expectations of returns and risk across asset classes. When short-term conditions differ materially from long-term expectations, we make tactical adjustments—for example, biasing toward shorter-duration bonds when interest rates are expected to rise, or tilting sector exposures as the economy moves through the stages of the business cycle.
Tactical investing is not market timing. It means tilts around the strategic allocation, not all-in or all-out positions. We rarely eliminate exposure to an asset class, and we never concentrate entirely in any single asset class.
3. Think Globally
“Global” applies in two senses — across instruments, and across geographies.
Across instruments. We consider both indirect investments (ETFs, mutual funds) and direct investments (individual securities, Treasury bills). Indirect vehicles provide low-cost, diversified exposure; direct holdings can offer lower cost and greater precision in the right circumstances.
Across strategies. We consider both passive and active approaches. Passive is generally the most efficient way to gain exposure to a well-defined factor where a good index exists (for example, large-cap U.S. equities). Active or semi-active management may be preferable in less efficient markets where a suitable index is unavailable (e.g., small-cap value or certain fixed-income sectors). Fundamental-weighted strategies can also offer an alternative where traditional market-cap-weighted indices are concentrated in a small number of dominant names.
Across geographies. The United States currently represents roughly 60% of global equity market capitalization — meaning a meaningful share of the investable equity universe lies outside the U.S. A degree of home-country bias is justified by the depth and liquidity of U.S. markets, but we believe most portfolios should hold meaningful exposure to both developed and emerging international markets.
4. Price and Value Matter
The price paid for an investment should be reasonable relative to its fundamentals and to comparable alternatives.
When buying a rental property or a small business, a prudent buyer would not pay any price — they would assess whether the price is fair relative to the cash flows the asset is expected to generate, including credible expectations for growth. Securities are no different. We prefer investments priced reasonably relative to their current cash flows and future growth prospects — an approach sometimes described as growth at a reasonable price, or strategic value investing.
This is not the same as buying cheap for its own sake. Some investments trade at low prices because their businesses face structural decline or persistent quality issues, and those low prices are often deserved. The discipline is to distinguish genuine mispricing from fair pricing driven by poor fundamentals.
5. Cost Matters
Costs — commissions, bid-ask spreads, management fees, and taxes — are a continuous drag on returns.
We work to minimize costs at every level, and we pay premium fees only where we believe the incremental return justifies them. Where a mutual fund or ETF costs more than a low-cost alternative, the expected net-of-fee return must plausibly exceed the benchmark by at least the fee differential. Where that standard cannot be met, we choose the lower-cost option.
We treat taxes as a cost to be managed like any other. Techniques such as tax-loss harvesting — and, where appropriate, tax-gain harvesting — are applied systematically to improve after-tax returns over time.
6. Location Matters
Placing assets in the most tax-advantaged account type — taxable, tax-deferred, or tax-free — can meaningfully improve long-term after-tax returns.
Asset location is most impactful for investors holding meaningful balances across accounts of different tax treatment. As a general framework:
- Low-yielding liquid holdings held for liquidity or diversification (money market funds in normal conditions) generally belong in taxable accounts, where they can be easily accessed. Municipal bonds and municipal money market funds are always held in taxable accounts — placing them in a tax-deferred or tax-exempt account would convert tax-free income into taxable ordinary income.
- Assets producing ordinary income or short-term gains (for example, higher-yielding bonds, REITs, and high-turnover strategies) generally belong in tax-deferred or tax-exempt accounts, where the tax-inefficient income compounds without annual drag.
- Assets producing qualified dividends and long-term capital gains generally belong in taxable accounts. The longer the expected holding period, the greater the deferral advantage and the stronger the case for taxable placement.
In Practice
No single principle stands alone. A portfolio designed around only one — cost efficiency, or tax efficiency, or low valuation — is likely to underperform one that reflects all six principles in balance. We treat these ideas as the framework within which we tailor the specifics to each client’s circumstances, objectives, and constraints.