Understanding the Investment Process

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I’ve written before that investing is not Rocket Science, it’s a process and a discipline. Im amazed how confusing the financial industry has made investing for the retail investor, with terms no one can understand and charts you need to have studied at Harvard to understand. So I thought I would share my four simple steps of the investment process.

  1. Financial Planning… As with any journey, you need to start out with your current location and know where you want to end up. From there you map out the journey. Financial planning as it relates to investment strategy is no different. We start with where you are now and where you want to be in the future, and we can then use our software to determine an appropriate amount of risk for you to achieve your goals. I don’t believe in taking risk for risk sake, I believe that you should take the minimal amount of risk for you to achieve your goals. (Risk meaning your exposure to the stock market). 
  2. Diversification…. (Asset Allocation) There are 6 main asset classes that we can provide you for your investment strategy. Stocks, Bonds, Cash, Currencies, Commodities & Real Estate. There are some hybrids however these are the major asset classes. To manage volatility, we want you to have some exposure to each, and not have all your eggs in one basket.
  3. Investment Selection……. Obviously the important step in the process and everyone does it differently. I prefer to manage our client’s investments “in house” meaning rather than send their assets to a third party to manage we create our own portfolios, navigating the landscape of over 3,000 stocks and through our screens and research reducing that number eventually down to between 20- 30 stocks that make the portfolio. After doing this for a while, I prefer this method for the following reasons.
    1. We can tell you what’s in your portfolio
    2. We can tell you why it’s there
    3. We can tell you how it performed
    4. In both good and bad markets, we can tell you what we are doing about it, and why
    5. And lastly, Its efficient…. From implementation to cost.
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  5. Rebalancing…. We use this strategy to ensure that our clients stay within the risk parameters the financial plan has determined as appropriate. If stock markets perform well, then it’s likely that your stock exposure has lifted and it may be pertinent to reduce stocks, and if the opposite occurs then it may be pertinent to buy some more.

So I hope that the above thirty-thousand-foot view of the investment process (as I see it) can help you breakdown a lot of the noise and rhetoric as it relates to investing your hard earned money.

As always should you have any questions, please don’t hesitate to give us a call



Investing involves risk, investors may incur a profit or loss regardless of the strategy employed. Asset allocation and diversification do not ensure a profit or guarantee against loss. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.