Every client’s circumstances are unique. We do not force our clients into a predetermined model because that’s not how we approach investing. The financial portfolios BWA develops are customized for each client’s needs and goals. Think of this customization in the same way as having a suit or dress tailored to fit you perfectly; we tailor an investment portfolio to best fit your needs.
There are many important reasons that a portfolio needs to be tailored.
For example, most of our clients have a 401(k) or some other workplace
retirement plan. We review the current investments in your 401(k) and
develop an investment strategy to complement what you’re already doing.
Although each client portfolio is customized, they tend to have the same
basic components. Virtually all portfolios will have some mixture of stocks,
bonds and cash. This is the basic composition of all portfolios with the
percentages allocated to stocks, bonds and cash being the greatest factor in determining the portfolio’s response to market conditions.
We use many assets classes that are basically different stocks, bonds and cash. Some are Large Company US Stocks, Small Company US Stocks, Developed Country Stocks, Emerging Market Stocks, Real Estate, Commodities, US Bonds, Developed Country Bonds, as well as Emerging Country Bonds. Our customized portfolios typically have nine or more positions. We spend time with each client so they know what we are proposing for their portfolio and if the client does not want a particular asset class, we eliminate it. If the client wishes to include a particular investment we discuss how to best position that investment within the portfolio. Remember, we customize to the client’s wishes and needs.
Once we determine the mix for a client, this becomes their “Ideal Portfolio.” This “Ideal Portfolio” remains until the situation changes or the client feels it is unsuitable.
All research is done by our advisors using a variety of tools. We select money managers based on their performance, how they manage risk, how well they fit within a particular asset class, and how they fit with other money managers that we use. They are monitored on a continuing basis using these same criteria. We have no quotas with investment firms and we do not receive compensation from any firms. In order to eliminate conflicts of interest, we work for and are paid only by our clients.
When developing a client’s “Ideal Portfolio”, we allow for tolerance within the allocation mix of asset classes. If a portfolio position falls outside of that tolerance, we recommend rebalancing back to the “Ideal Portfolio.” Often, this might mean recommending that a client sell off a percentage of a position that has become too large and purchase more of a position that is too small, as determined by their “Ideal Portfolio.” We recommend this to return the portfolio to its “Ideal” percentages to keep the risk aligned with what the client agreed upon.
This sounds simple, but it’s not always easy to maintain the financial discipline to sell off a position which is performing very well and purchase something which has the appearance of performing poorly in comparison. When followed correctly, this strategy can lead to opportunities for buying “low” and selling “high”, a key to long-term investing success.
The Process Chart provides prospective clients with an accurate visual perspective of what to expect with Balanced Wealth Advisors.
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