Our investment strategy is based on evidence, not speculation.

Chances are, if you go looking for the next “hot stock” or try to pinpoint the perfect time to get in or out of the market, you’re not going to build wealth. You’re just going to move backwards. There is no need for these counterproductive and emotionally draining strategies. The true value of a financial advisor often reveals itself in the form of “behavioral investment counseling.” Part of our job is to bridge the behavior gap – the difference between the returns of an investment and the returns of the average investor.

This gap exists because of the natural human tendency to allow emotions to overwhelm rational thinking when making investment decisions. There is a better way. We let decades of financial research and analysis guide our recommendations. Our evidence-based investment strategy brings logic and simplicity to your life, so you can focus on the things you can control and ignore the things you can’t. We’ll be here to ensure you never veer off the track.

Many money managers claim to know the “right” investments to “beat” the market. With vast (and expensive) resources at their disposal for investment research, they spend their entire career studying the markets in that attempt. Yet academic study after study shows that very few will succeed, yet many will charge high fees trying. Ignoring the sales hype, we design and manage well diversified, low cost and tax efficient portfolios which take the least risk needed to achieve your financial goals.

Investment Foundations

ASSET ALLOCATION

Asset type selection and allocation trumps picking “good” managers.

The greatest indicator of long-term investment performance is your choice of asset classes and their allocation, not the specific stocks or bonds within those classes. This finding underpins our investment philosophy and is commonly known as Modern Portfolio Theory. Over time, we rebalance your accounts as different segments of the market (asset classes) go up and down. This systematically buys assets when they are lower priced and sells them when they are higher priced in a slow, deliberate and tax efficient way.

INVESTMENT SELECTION

Past performance guarantees NOTHING!

Many investors focus on recent performance numbers when choosing investments. This approach ignores a multitude of factors. Why did the investment outperform? Did the manager take extra risk? Is the fund manager still there? What benchmark is used to compare performance? History teaches us that very few managers can sustain above average returns more than a few years. The best indicator of success is fees: the higher the fees, the lower the average performance. We scan the investment universe to select low cost, tax efficient, and suitable funds for you.

RISK ASSESSMENT

The three R’s of investment risk.

The first step in our investment process is to determine the risk tolerance, risk capacity, and risk need you have for your investments. A wealth of evidence predicts that those who do not adequately match their optimal portfolio risk to their actual portfolio risk will trade excessively and hurt their returns. Our risk assessment methodology helps quantify your optimal risk level, enabling us to construct a portfolio for you that will avoid the common pitfalls and knee-jerk reactions that ruin many financial plans.

Pursuing a Better Investment Experience:

1Embrace Market Pricing
The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers—and the real-time information they bring helps set prices.

2Don’t Try to Outguess the Market
The market’s pricing power works against mutual fund managers who try to outperform through stock picking or market timing. As evidence, only 23% of US equity mutual funds and 8% of fixed income funds have survived and outperformed their benchmarks over the past 20 years.

3Resist Chasing Past Performance
Some investors select mutual funds based on their past returns. Yet, past performance offers little insight into a fund’s future returns. For example, most funds in the top quartile (25%) of previous five-year returns did not maintain a top-quartile ranking in the following five years.

4Let Markets Work for You
The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

5Consider the Drivers of Returns
There is a wealth of academic research into what drives returns. Expected returns depend on current market prices and expected future cash flows. Investors can use this information to pursue higher expected returns in their portfolios.

6Practice Smart Diversification
Holding securities across many market segments can help manage overall risk. But diversifying within your home market may not be enough. Global diversification can broaden your investment universe.

7Avoid Market Timing
You never know which market segments will outperform from year to year. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

8Manage Your Emotions
Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions.

9Look Beyond the Headlines
Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. When headlines unsettle you, consider the source and maintain a long-term perspective.

10Focus on What You Can Control
A financial advisor can offer expertise and guidance to help you focus on actions that add value. This can lead to a better investment experience.

Evidence-Based Investment Philosophy

Our investment management philosophy is heavily influenced by the Nobel Prize-winning work of Harry Markowitz and Eugene Fama. We’ve developed a deep understanding of how to best capture the returns of the financial markets. Our approach is based on established facts and real evidence, not empty opinions or speculation. Investment recommendations based on historical, observable market behaviors and prices take emotion out of the equation, and ultimately leads to steadier, more predictable results over the long-term.

We build global portfolios that include stocks, bonds, and where appropriate, real estate and commodities. By diversifying across many different asset classes we’ll help you balance the relationship between risk and return to ensure your long-term wealth goals will be achieved.

We are strategic, long-term investors, and do not engage in market timing or forecasting. We’ve extensively researched each asset class used in our portfolios, so we understand what to expect and the purpose each serves in a diversified investment allocation. As a client of Financial Synergies, we’ll create a custom investment portfolio to suit your unique goals.

You can feel confident knowing that your investments are managed by an experienced team of professionals who adhere to a disciplined, time-tested strategy. It’s refreshing to be able to tune out the daily, irrelevant “noise” of the financial media.

Targeting Expected Return Premiums

Decades of academic research and analysis has taught us that there are proven expected return premiums when investing in stocks and bonds. For example, over the long-term we expect value stocks to outperform growth stocks, and longer maturity bonds to outperform shorter maturity bonds. These expected return premiums are pervasive, persistent, and robust and can be targeted in diversified investment portfolios.

We construct our investment portfolios to capture these premiums:

STOCKS
  • Market Equity Premium - Stocks vs. Bonds
  • Company Size Small-Cap Premium - Small vs. Large Companies
  • Relative Price Value Premium - Value vs. Growth Companies
  • Profitability Profitability Premium - High vs. Low Profitability Companies
BONDS
  • Term Term Premium - Longer vs. Shorter Maturity Bonds
  • Credit Credit Premium - Lower vs. Higher Credit Quality Bonds

Efficient Portfolios

We use institutional mutual funds and exchange-traded funds (ETFs) as the building blocks of our allocations. These investment vehicles allow for broad diversification, low costs, tax-efficiency, and minimal trading.

Ongoing Management

Once your investment plan is implemented we’ll monitor the portfolio daily to make sure your assets are performing according to your long-term plan. We’ll rebalance, make adjustments, and provide tax-loss harvesting as necessary, so you never have to worry about your investments. What’s more, we help you understand the evidence behind it all, helping you feel even more confident in the decisions we make together to best safeguard your financial future.

download our brochurePursuing a Better Investment Experience

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