Fee-Based Investment Management
Successful investing requires the development of long-term plans arrived at in an objective and dispassionate manner. Unfortunately, investment decisions are often based on isolated, short-term considerations, without regard to the portfolio or the interrelationships of the assets used.
At Retirement Plus Inc., we do not take the narrow approach of attempting to beat the performance of individual markets. Instead we adhere to Modern Portfolio Theory and use a more comprehensive method of devising strategies to achieve clients’ long-term objectives within their specified risk parameters. We utilize a sophisticated asset allocation program and an integrated investment system that includes all of the computer models and ancillary services required to develop and manage your portfolio
Modern Portfolio Theory and Asset Allocation
Modern Portfolio Theory is based on several major premises. One important premise is that investors are inherently risk-averse. Investors are not willing to accept risk except where the level of returns generated will fairly compensate for that risk. It is probably reasonable to assume that investors are more concerned with risk – that they will lose money – than they are with rewards – that is, making money. The degree to which an investor is willing to accept risk is known as risk tolerance.
Asset allocation is the process of selecting a mix of asset classes and efficiently allocating capital to those assets by matching rates-of-return to a specified and quantifiable tolerance for risk. Risk tolerance is essentially the percentage of an investment portfolio that an investor is willing to risk to achieve a specific rate of return.
Measuring Risk/Return in Diversified Portfolios
In the past, the problem has been how to quantify risk and its relation to return. Measurements of the risk and return characteristics of individual investments are inadequate in explaining what happens when investments are combined in portfolios. The true measurement of diversification between assets is called the covariance of the assets. Covariance measures the timing, direction and momentum of the movement of two variables. Are they moving in the same direction at the same time, and what is the volatility of the movement of each variable?
By calculating the covariances and expected returns for all assets in any given portfolio, it is possible to calculate the optimal portfolio mix for any degree of risk. Each portfolio on this "efficient frontier" will generate the highest possible rate of return for any specific level of risk, with risk being measured by the standard deviation (variance) of returns.
The number of assets in a portfolio is less important than the relationship of those assets. Therefore having many assets in a portfolio will not reduce the systematic risk in the portfolio as much as having negatively correlated assets. By using asset allocation methodologies, investors may achieve higher returns with less risk.
The process of asset allocation may include one or all of the following approaches:
- Strategic Asset Allocation uses historical data (mean rates-of-return, standard deviations and covariances) in an attempt to understand how the asset has performed and is likely to perform over long periods of time. The goal is not to "beat" the market, but to establish a long-term investment strategy using a core mix of assets.
- Tactical Asset Allocation uses periodic assumptions regarding the performance and characteristics of the assets and/or the economy. This approach attempts to improve portfolio performance by making "midcourse" changes in the long-term strategy based on near term expectations.
- Dynamic Asset Allocation involves changes in investor circumstances, which may lead to the modification of policies, objectives and/or risk tolerances. Resulting changes are intended to maintain equilibrium between the investor's policies and objectives and the asset allocation process.
Investing to meet your goals Our mission is to help you reduce your financial dangers, focus on your opportunities, and then provide a clear path to help you achieve your goals. We do this by building upon your strengths, employing our professional acumen, and then taking steps to increase the certainty that the job gets done right and on time. Peace of mind and a sense of surety are the most essential part of what we deliver through the financial planning and asset management process.
All services are provided on an independent, objective basis. In addition to discussion our fee structure with you during our initial meeting, we will provide you with a copy of our disclosure document. “Form ADV Form, Part II” will detail our fees, services, background, qualifications, regulatory history, and much more. Please take the time to read it and ask any questions you may have. Be sure you request a copy of Form ADV, Part II from any and all financial advisors you interview.
Whether you are independently wealthy and in need of professional wealth management, working hard to accumulate assets and build for a secure financial future, or just starting out on your financial journey, Retirement Plus, Inc. can provide the professional help and guidance you need throughout all the ages and stages of your life.
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to set up your complimentary initial meeting now. We’ll introduce you to our staff members, discuss our services in more detail, and show you a sample financial plan and model portfolio.
We’ve attempted to answer as many of your questions as we can on this Web site. Be sure to read the Who We Are section . And please do not hesitate to bring the Financial Planner Interview form with you should additional questions remain.
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