Scaling the Summit of Wealth: Mastering Every Step for Lasting Success
Comparative Financial Results
Calendar YTD through June and Trailing 1, 3, 5 Year Results
Comparative Risk Metrics
July 1, 2018 through June 30, 2023
Defining Investment Risk
"The vast majority of what we have been taught about investing is not effective for the long-term individual investor."
"Risk is the likelihood that when we must withdraw assets from our portfolio for consumption, they will have a lower value than we could reasonably expect based on our investment strategy."
“For long term investors, there is virtually no risk unless they panic and sell.”
“In short, the long term investor has almost no risk.”
Above quotes from: Cloonan, James B., Investing at Level 3, American Association of Individual Investors, 2016.
We are Focused on Long Term Wealth Creation
+ In our experience, some wealth managers and financial planners rely upon various derivations of Modern Portfolio Theory (MPT) to construct client portfolios, such as with a blend of stocks, bonds and treasuries.
+ In our view, MPT tends to overweight the importance short term market volatility risk for the long term investor. By doing so, over the long term MPT strategies may produce lower returns.
+ MPT places a greater value on averting short term market risk and a lesser value on the risk of not achieving Terminal Wealth, which is the expected (or goal) portfolio value at the end of an investment horizon.
+ We believe that long term investors should focus their efforts to achieve their Terminal Wealth goal. So, we suggest that a portfolio of all equity securities could offer investors an opportunity to reach their Terminal Wealth goal.
Defining Investment Risk
“Although it might appear to be riskier to accumulate wealth in stocks rather than in bonds over long periods of time, for the preservation of purchasing power, precisely the opposite is true: the safest long term investment has clearly been a diversified portfolio of equities.”
"It is very significant that in the more than two-century history of financial returns, stocks, in contrast to bonds or bills, have never delivered a negative real return over periods as short as 17 years."
Above quotes from: Siegel, Jeremy, with Jeremy Schwartz, Stocks for the Long Run, The definitive guide to financial market returns and long-term investment strategies, Sixth Edition, McGraw Hill, 2022.
Defining Investment Risk
+ Traditional measures of risk tolerance, whether self reported or by risk questionnaire, ignore many important attributes of one's overall risk taking capacity, thereby creating reduced wealth creation strategies that focus on short-term return/volatility trade offs measured against broad market indices.
+ Behavioral Finance research has shown traditional risk tolerance measures to not be an appropriate measure of risk for the long term investor as the resulting investment strategies lead to sub optimal terminal wealth levels that are significantly lower than one could reasonably expect to satisfy their goals and objectives.
+ We perceive risk tolerance as one's broadly framed, thoughtful and long-term willingness to trade-off the potential shorter term, some times gut wrenching, wealth declines observed in everyday market movements, which historically over the longer term are temporary, for the reasonable expectation of higher future terminal wealth levels.
Handbook of Consumer Finance Research, 2nd Edition, Jing Jian Xiao ed., Springer International Publishing Switzerland. See Chapter 2: "Financial Risk Tolerance," John E Grable, pg 19-32.