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Investment Management in Houston

Evidence-based investing based on decades of research and the science of financial markets

Our investment strategy is based on evidence, not speculation.​

Investment Management

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 management 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

Your investment portfolio is the growth engine behind your comprehensive financial plan. Without proper construction and risk allocation, you could be in danger of not meeting all your goals – or worse, even enjoying a comfortable retirement. You must ensure that your portfolio is built on evidence and a solid understanding of the financial markets – and our financial advisory services will set you up for investment success.

Asset Allocation

Asset type selection and allocation trumps picking “great” individual investments.

The greatest indicator of long-term investment performance is your choice of asset classes and their allocation, not the specific stocks, bonds, mutual funds, or ETFs within those classes. This is not to say that the chosen investment vehicles don’t matter, but only that those decisions are secondary to the overall portfolio allocation. If you get the overall allocation of your portfolio wrong, it most likely won’t matter what individual investments you choose to represent the asset 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 does not guarantee future success.

Many investors and advisors 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 to achieve outperformance?
  • Has there been consistency of returns over time?
  • Is the same fund manager still with the fund?
  • Was the investment in a sector/industry that did well across the board?
  • What benchmark is used to compare performance?

History teaches us that very few managers or securities can sustain above average returns for more than a few years. One of the best indicators 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 / individual securities for you.

Risk Assessment

The three R’s of investment risk.

The first step in our investment process is to determine the risk tolerancerisk capacity, and risk need you have for your investments.

A wealth of evidence suggests that those who do not adequately match their optimal portfolio risk to their actual portfolio risk will trade excessively, or worse, abandon their entire portfolio, and damage their long-term 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

Our 10 Principles for Investing Success

1Embrace Market Pricing

The stock 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.

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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.
Graphic 02

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.
Graphic 03

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.
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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.
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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.
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7Avoid Market Timing

You never know which market segments will outperform from year to year, or which direction it’s headed in the short-term. No one does. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

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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.
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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.
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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.

Graphic 10

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. It’s what makes our financial advisory services different from the rest.

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.

Access to private markets and alternative strategies

Financial Synergies offers our clients access to private markets and alternative strategies, but only if it is in their best interest and fits into the overall long-term plan. This allows qualified clients (usually higher net worth) to further diversify their portfolios by investing in securities and markets that are not publicly available. Note that private securities are not appropriate for everyone. They can carry more inherent risk and are typically subject to higher fees and longer holding periods than public securities.

Some examples of private investment types:

  • Private equity
  • Private credit and lending
  • Private real estate
  • Structured notes
  • Options strategies
  • Other alternatives

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

Im Stocks

Bonds

Im 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 Portfolio 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. Finally, an investment management solution that works for you.

Investment Management Houston

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Ten Principles of Successful Investing

Ten Principles of Successful Investing

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