Investing with purpose

 

 

At Main Effort we approach each portfolio with the same question:

"What is the purpose of this investment?"  

The answer to this question drives our decision making in the construction of our portfolios.  Every decision we make with regards to the portfolio must be based upon the specific purpose of the investment and what it is designed to achieve.  Once we identify the purpose, we apply the following fundamentals to every portfolio we build:  

Diversity:  Each portfolio is carefully constructed to maintain a solid diverse representation of the portions of the market we are trying to capture.  We look to mitigate risk by limiting over exposure to any security or sector.   We minimize or eliminate any redundancy to other portfolios.  Along with our own individual security portfolio we add further diversity through the use of mutual funds and exchange-traded funds (ETFs).

Asset Allocation:  Once we determine the purpose of the investment we ultimately determine the ratio of equity (stock) vs. fixed income (bond or cash) positions.  The asset allocation is a crucial piece of the portfolio and is carefully reviewed on a regular basis to ensure that it is accurately reflecting the objectives of the portfolio.

Fee Consideration:  Investing comes with a price whether it be advisor fees or expense fees built into the investment.  We are very conscious and sensitive to the overall effect of fees on the portfolio over time.  Our portfolios are created to minimize fees to the maximum extent that we deem possible without compromising performance potential or critical insight.  Our advisory fees for a portfolio will normally cover all expenses incurred for full and ongoing financial planning for each of our clients.

Focus:  Perhaps the most important factor in building a portfolio is creating it so it will focus on achieving the specific purpose identified from the start.  Our investment selections are carefully researched and selected in an effort to provide the best representation of a particular type of investment without compromising diversity, asset allocation and cost.  Our models are continuously reviewed and adjusted to ensure that we are providing our clients with an appropriate combination of investments with the goal of achieving the portfolio's purpose.  We review our investment selections on a daily basis and review each individual portfolio up to 5 times per year.

 

Sample Portfolio

The following is a sample portfolio with some hypothetical concepts to achieve the designated purpose.  It is important to understand that there are no guarantees with respect to market investing and that any market exposure results in the investor incurring market risk.

(We will use hypothetical names for the securities to demonstrate representation).

PORTFOLIO AMOUNT:   $500,000

ACCOUNT TYPE:  IRA (Traditional - pre tax - all withdrawals are taxed as income at given rate)

PRIMARY PURPOSE:   To provide supplemental retirement income for remainder of both husband and wife's lives with ability to have market appreciation over time while mitigating risk.

RISK TOLERANCE:  Moderate

SPECIAL CONSIDERATIONS:  Both retired from publicly-traded company Any Company, Inc (ANYC) and hold almost 5% of their overall combined liquid assets in this individual position

ASSET ALLOCATION:  55% equities and 45% fixed income

Equity breakdown:   $275,000

1.  Individual security:  $50,000 (10% of overall portfolio 10 companies representing diverse cross section of investment sectors at $5,000 per position)

2.  Investment Companies (Mutual Fund):  $100,000 (20% of overall portfolio - up to 6 funds representing both domestic and international positions of all-size companies)

3.  Exchange Traded Funds (ETFs):  $125,000 (25% of overall portfolio - up to 5 ETFs representing both domestic and international positions of all-size companies.

Fixed Income breakdown:  $225,000

1.  Investment Companies (Mutual Fund):  $100,000 (20% of overall portfolio - up to 5 funds representing all durations and types of fixed income securities)

2.  Exchange Traded Funds:  $100,000 (20% of overall portfolio - up to 5 ETFs representing all durations of fixed income options).

3.  Money Market / Cash:  $25,000 (5% of overall portfolio - cash - for tactical deployment in future trades)