My Investing Philosophy

My philosophy around investing is grounded in simplicity, and modeled on the passive approach brought to the mainstream by Jack Bogle when he built Vanguard in 1975.  In my opinion, Bogle has done more to advance the cause of the individual investor than any other single person.  I was a Vanguard investor long before becoming an adviser, and I still use their funds, as well as their approach, which includes:

  • Develop a suitable asset allocation using broadly diversified funds
  • Minimize costs
  • Maintain perspective and long-term discipline

My clients portfolios are managed along side my own.  As a fiduciary adviser, it should be no other way.

The active / passive debate has raged for years, with most evidence showing that passive beats active more often, and over the long haul.  It’s certainly been in favor recently, as a recent series in the Wall Street Journal titled The Passivists points out.  Despite the fact that this support my case, I want to point out two issues I have with the recent focus on passive investing.

First, without getting into a lengthy discussion of Behavioral Finance here, I’ll point you to this US News article which summarizes nicely why we humans make, at times, poor decisions that can lead to poor outcomes.  Rising markets that continue for years can give the impression that the markets are a safe place for flying on auto-pilot.  And if you can manage to keep your hands off the controls when the storms start raging, and you’ve got enough fuel to keep you going till the clouds clear and that runway materializes on the horizon, then auto-pilot can and does work pretty well.

The second is that a passive approach does not imply passivity.  Which is why I refer to mine as an active approach to passive investing.  While I use low cost index funds (ie passive investments) in my portfolios, I don’t take the simple buy-and-hold-no-matter-what approach that passive investing might bring to mind.   My approach to managing the portfolio includes:

  • Performing of frequent portfolio checks
  • Rebalancing within target bands, rather than by strict targets
  • Employing dollar cost averaging to accomplish as much of the rebalancing as possible
  • Utilizing charting, technical, and cyclical analysis to determine asset classes that represent buying opportunities

In my opinion, these combine to avoid excessive trading while reducing the likelihood of buying high and selling low.

In closing, I’ll repeat something I’ve said for years: market timing is a loser’s game.  But turning a blind eye to where we are in the ordinary cycles of the market puts investors in a similarly disadvantaged position.

Contact me if you’d like to discuss my investing philosophy and approach in greater detail.