Investment efficiency means being rewarded for your risk, calibrating your risk to your personal circumstances and minimizing your costs. Peer-reviewed research has taken the guesswork (but not the risks) out of choosing investments. Point Loma Advisors can show you how to in invest efficiently; please contact us to learn more.
Plan - To meet your goals, you need a plan tailored to your circumstances with a budget that allocates portions to savings and investment and has realistic expectations for future returns.
Discipline - Your plan must allow you to sleep at night and also prepare you to ride out inevitable market storms.
Put Yourself First - Know who is working in your interest, who is working for their own interest, and what you're paying in fees and expenses.
Random Nature of Investment Results - In the short term, it is extremely difficult, if not impossible, to distinguish investment price fluctuations from random variance. Trading based on predicting short-term market moves (market timing) is highly unlikely to help you meet your financial goals.
Efficient Market Hypothesis - Generally speaking, we believe all public information is fully included in securities market prices.
Active Management versus Passive Management - It is exceedingly difficult to consistently beat market averages, after expenses and taxes, through active management. The probability of identifying active managers ahead of time who will beat market averages appears no greater than random selection.
Capital Asset Pricing Model - The capital asset pricing model assumes that efficient markets reward investors with returns commensurate with the systemic risk assumed.
Factors - Investment factors include, but are not limited to, equity/fixed-income portfolio ratios, large/small company distinctions and growth/value company distinctions. From time to time new investment sectors and factors are identified.
Modern Portfolio Theory - Modern portfolio theory analyzes portfolios as a whole rather than individual component securities.
Keep Your Costs Low - Investors should be very attentive to costs. It is common for actively managed mutual funds to charge 1% or more in annual expenses while passively managed funds frequently charge 0.25% or less. The overwhelming evidence is that mutual fund investment performance is inversely related to the size of the funds' fees. The more you pay, the less you get to keep for yourself.
Life Cycle Investing
Accumulation Phase - It is critical to begin investing a significant portion of income as soon as possible and to invest a substantial portion in equities, which over a lifetime of investing, have historically provided returns superior to fixed income securities. Markets go up and down, sometimes dramatically. It is critically important to plan for this, and to stick to the plan when it happens.
Transition Phase - This is is the trickiest part to navigate successfully and should begin approximately ten to twenty years prior to the spending phase, with periodic updates. It begins with a detailed analysis of spending, income, ability to postpone the spending phase, ability to adapt to fluctuating income, and risk tolerance.
Spending Phase - This phase begins when you stop accumulating and start spending your investments. There are several potential asset components to the spending phase, each with their own risks: equities, fixed income, annuities, Social Security, and pensions. Point Loma Advisors doesn't rely on thumb-rules for spending a particular percentage of assets or for a particular asset mix. We use real data, your own circumstances, and update your plan at least annually. Annuities are sometimes unfairly maligned, but low-cost annuities may help some households meet their retirement income goals.
Financial Technology (FinTech) greatly enhances the ability to collect, organize and present actionable information at very low cost for human decisions. However, FinTech is the servant and not the master; investors and advisors should never turn over their financial fate or their personal responsibility to the latest software. Point Loma Advisors uses FinTech as a powerful tool to help create, monitor and implement strategic financial plans but does not use it to react to market fluctuations, to facilitate short-term trading, or to provide machine-generated investment recommendations.
The Good News
Stock picking and access to sophisticated investment vehicles are not necessary to meet your financial goals. Once an appropriate financial plan is constructed, choosing the most effective investments is relatively easy. Point Loma Advisors recommends mostly low-fee, no-load passively managed mutual funds.
What is the value of Point Loma Advisors as a financial planner or investment advisor?
Just as elite athletes work with a coach, individuals work with investment advisors for an outside perspective of their financial profile and to quickly zero-in on strengths and weaknesses. There is a tremendous amount of free advice designed to move clients into products most profitable to the financial industry. Isn't it better to engage a fiduciary advisor to optimize profit for yourself? Point Loma Advisors offers professional investment expertise at very reasonable rates. Point Loma Advisors receives no commissions on recommended investments; our entire compensation is paid by our clients.