Investment Management

Investment Management | WebsterRogers Financial Advisors SC

We employ an evidence-based investment philosophy grounded in empirical research and financial theory. It suggests that investors can significantly improve their chances of success by following certain principles which have been empirically demonstrated to yield good results over time.

This evidence-based investment philosophy is largely predicated on the work of Nobel Prize-winning economists like Harry Markowitz (who pioneered Modern Portfolio Theory) and Eugene Fama (known for the Efficient Market Hypothesis). This philosophy puts a strong emphasis on rational decision-making, long-term planning, and the reduction of risk through diversification. It also focuses on controlling the things within the investor's power (like costs) rather than trying to predict things that are fundamentally unpredictable (like short-term market movements). Key principles of our approach include:


1. Diversification

Diversification is the idea of spreading your investments across a wide range of assets to help reduce risk. The theory behind this is that not all investments will perform poorly at the same time, so by diversifying, you help reduce the risk of a significant loss. This is supported by the theory that the risk of any individual stock is largely irrelevant in the context of a well-diversified portfolio.

2. Emphasis on Asset Allocation

The asset allocation decision - how much to invest in different categories of investments (like stocks vs bonds) - is the most important determinant of a portfolio's variability of return. Research has shown that asset allocation determines about 90% of a portfolio's return variability over time.

3. Focus on Cost-efficiency

Research has shown that lower-cost investments often outperform their more expensive counterparts. This principle encourages the use of low-cost exchange-traded funds (ETFs). Additionally, there are potential measures that may be employed to reduce clients’ investment-related taxes, such as tax loss harvesting and tax-exempt investments.

4. Ignore the Noise

This principle encourages investors to ignore short-term market noise and focus on their long-term investment strategy. This is based on evidence that short-term market movements are largely unpredictable and attempts to capitalize on these movements often lead to poor long-term results.

5. Focus on the Factors of Return

Over the long-run, what are the characteristics of investments that have provided higher risk-adjusted returns? There are several well-documented factors that have historically provided higher risk-adjusted returns. We incorporate these factors in our portfolio management construction. These factors include:

  1. Size: Smaller companies have historically outperformed larger ones, on a risk-adjusted basis.
  2. Value: Companies with lower price-to-earnings or price-to-book ratios have outperformed more expensive ones.
  3. Quality: Companies that are profitable, have stable earnings, and low debt tend to perform better than those with lower quality earnings.



Investment Management in Practice

Investment Management In Practice: We primarily utilize a combination of actively-managed and index exchange-traded funds (ETFs) to construct model investment portfolios.  For each asset class, we evaluate and screen potential funds. After rigorous due diligence is performed, one fund is selected over the others to be used in the portfolio.

Depending on your personal circumstances, we may also use other types of investments, such as mutual funds, stocks, and individual fixed income securities.

Using information provided by you, we will recommend an appropriate asset allocation for your portfolio and invest accordingly.  Each client is evaluated independently—while a model portfolio might work well for one client’s investment objective, unique circumstances may require us to deviate from a model portfolio to address another client’s specific needs. Unless directed otherwise, we will always help you set your asset allocation while considering all of your financial assets, regardless of whether or not we manage all of them.