Markets are Efficient and Timing Efforts Fail
At Axiom, we believe that markets are efficient and active portfolio management leads to disappointment. Decades of financial and academic research shows that most active managers do not perform up to their respective benchmark. What’s worse, the cost of trying to out smart the markets can cost unknowing investors even more. It is our belief that using low-cost, institutional asset class mutual funds is the most prudent way to achieve positive results.
Goals First Approach
Goals drive portfolio construction. Have you ever tried to use a GPS without knowing your destination? Impossible, right? You’re portfolio is no different. You might have short, intermediate, or long-term goals. Each of these require a different approach. We take the time to understand why you are investing, and then construct investment strategies to match your goals.
Diversification Reduces Risk
It’s the old adage of not putting all your eggs in one basket, but modern portfolio theory shows that diversification reduces investment risk and enhances portfolio return. Spreading your investments among thousands of stocks, bonds, and asset classifications is the prudent way to invest in up and down markets.
Rebalancing Takes the Emotion Out of Investing
As with any financial decision, investing is emotional. As humans, we tend to want to do the opposite of what’s right; we get caught up with greed in up markets and panic in down market. Rebalancing forces us to sell assets that have over performed and buy those that have underperformed. It provides a mechanical approach to “selling high and buying low.” If applied consistently, this process as been shown to help achieve positive results over periods of time.
Tax Planning is Critical
An asset allocation must be complimented by a thoughtful tax planning strategy. Knowing where to place certain securities and asset classifications to lower current and future taxes can save hundreds to thousands of dollars. It’s important to align the way an asset generates revenue with the type of account it resides. For example, selling an asset that would qualify for the lower capital gains tax in a tax qualified account loses tax value if that amount is pulled from the tax qualified account at ordinary income tax rates.