Absolute Performance verses Relative Performance
With regards to performance, we’ve found that most investment advisors’ primary objective is focused on “beating the market” in any given period; they want their assets to perform better than the market as a whole. This approach focuses on relative return, measuring how assets performed in relation to a specific benchmark. Regarding this relative return mentality, our question has always been:
“If beating the benchmark is your primary objective, how did your assets perform when the benchmark returned -22% in 2002, or -37% in 2008? If your assets returned -20% in 2002 (or -35% in 2008) you achieved your objective in each year, but are you any closer to reaching your financial goals?”
At First Landing, our primary objective is to help you reach your goals and objectives, whatever they might be. Therefore, we view portfolio performance from an absolute return perspective; that is, we focus on how assets perform over a given period, after-taxes, and independent of any other measure. In short, an 8% return is an 8% return, regardless of whether the market is delivering 6% or 9%. We structure investment portfolios with the goal of increasing risk-adjusted returns while fostering greater stability in returns over time. This approach can help smooth out the impact of market fluctuations, reducing the anxiety that day-to-day market shifts can create.
This absolute return approach requires an array of portfolio management techniques and resources that differ from traditional methods. Accordingly, alongside these traditional stock and bond portfolios, our strategies incorporate managed futures, gold, real estate, commodities, as well as other low and/or non-correlated assets which aim to increase overall performance while mitigating diversifiable risk. By combining the vast market resources of Raymond James with our own specialized experience and professional knowledge, we offer our clients a proactive, outside-the-box approach to meeting their investment goals.
There is no assurance any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss. Past performance is not indicative of future results. Alternative investments involve specific risks that may be greater than those associated with traditional investments and may be offered only to clients who meet specific suitability requirements, including minimum net worth tests. Investing in commodities and precious metals is generally considered speculative because of the significant potential for investment loss. They are volatile investments and should only form a small part of a diversified portfolio. Diversification does not ensure a profit or protect against a loss. Investing in real estate can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws and interest rates all present potential risks to real estate investments.