Our investment philosophy is built upon four main pillars:
- The value of diversification
- Keeping fees as low as possible
- The value of passive investing
- Starting sooner rather than later
A diversified portfolio invests in a diverse pool of asset classes in order to create an investment strategy that seeks to have collectively lower risk than if you were to solely invest in any one individual asset. Diversification allows us to build portfolios properly tailored to each client’s preference to attempt to maximize returns at their preferred level of risk.
Low fees allow investors to not only keep more of their hard-earned money, but also keep more of it working for them in the markets. This provides the added benefit of compound returns, or the phenomenon of growing your money faster through generating returns on top of previous earnings.
Passive investing refers to building portfolios that are designed to grow with the market long-term instead of trying to chase short-term fluctuations. Research continues to show that by shunning the high stakes game of active stock picking, investors can rise above psychological biases to capitalize on the growth of the markets.
Nobody actually knows what the market will do tomorrow, next week, or a year from now. While it is tempting to "time" the market, it is much better to get your money invested sooner rather than later to take advantage of the rise in the markets. For example, investors that entered the stock market at the record peak of the S&P500’s value on October 11, 2007 and maintained their investments would have been up by 18% as of the end of 2013. (Google Finance: www.google.com/finance)
We use the tools of Modern Portfolio Theory to design the optimal portfolio for a given level of risk. In addition, we further optimize our investment process to minimize tax consequences and streamline the reinvestment of dividends and contributions. WiseBanyan estimates that our investment strategy will earn an investor, who initially deposits $100,000, over $300,000 above what he or she would have earned through more traditional investment methods. This estimation is based on a 30 year investment horizon, a historical 7% expected return, and a reduction of 2% in fees. This projection is for informational purposes only and should not be construed to be a guarantee of performance, past performance is not a guarantee of future returns.