After agreeing on the recommendations of the financial plan, we create an Investment Policy Statement (IPS) for each client. This document defines the investment objectives and establishes target allocations for stocks, bonds, alternative investments and cash in the portfolio. These targets are based on each client’s defined goals and tolerance for fluctuation in market returns.
Portfolio construction starts by identifying the best locations for different assets. For example, tax inefficient income-producing assets (bonds, real estate investment trusts) are typically best placed in tax-deferred accounts. Holdings with the highest expected returns may be best suited for Roth IRAs and investments that don’t distribute much income or dividends may make more sense in taxable accounts.
At the core of most of our recommended investment strategies are mutual funds from Dimensional Fund Advisors (DFA). DFA has a stellar reputation for evidence-based investment management which has historically translated into attractive performance relative to benchmarks. We include exceptionally low-cost exchange-traded funds in our recommended portfolios to create globally balanced diversification.
Always, we seek to manage investment portfolios that accommodate for clients’ objectives, risk-and-return tradeoffs, tax efficiencies, and cost effectiveness.