To determine the optimal portfolio for you, we must first determine your financial and related objectives and constraints. Your cash flow needs, goals and objectives, risk tolerance and tax status are some of the other factors taken into account.
Our analysis is based on historical asset returns and our current economic forecasts, our estimates of total return, volatility and the interdependence among asset class returns. The lessons of experience are considered in our recommendations.
We then develop the asset allocation most appropriate for you and select specific investments. Because we are not compensated by commissions, we are objective about the selection of investment securities and to the timing of the transactions. WESCAP Group utilizes an open architecture approach, which allows access to a nearly unlimited universe of investment vehicles. This gives us the ability to choose the most suitable investments for your unique set of circumstances. Your account may include investments in such securities as no-load mutual funds, closed-end funds, exchange-traded funds, hedge funds, common stocks, real estate investment trusts, and municipal, corporate and government bonds. Quarterly reports detailing your investment holdings and portfolio performance are provided for your review.
WESCAP Group’s Approach to Asset Class and Strategy Selection
We believe that WESCAP Group’s approach to asset class and strategy selection differentiates us from many of our competitors. Thanks to our consulting background, we start without investment prejudices. Next, we apply rigorous analysis to disqualify faddish, poorly-constructed or high-cost investments and strategies.
Then we come to the most critical aspect of portfolio design: proper asset allocation and investment selection. Long-term investment success often means taking calculated risks in order to obtain portfolio returns several times the inflation rate. At the same time, minimizing cumulative losses (maximum drawdown) during difficult investment environments is often crucial to success. This somewhat paradoxical set of requirements can be resolved by embracing the precepts of Harry Markowitz, the Nobel prize winner for devising Modern Portfolio Theory (MPT). The basic tenet of MPT is very simple: Owning more investments with different attributes lowers portfolio risk without reducing overall portfolio return.
We strive to rigorously practice this concept of intelligent diversification with a higher degree of innovation and dedication than any other firm we have encountered. Applying this approach in order to realize higher expected returns without adding risk is the only true “free lunch” available in the investment world. Nevertheless, most people, including investment professionals, cannot (or will not) try to understand and find ways to invest in different, less traditional asset classes and strategies. Many think sufficient diversification means owning some U.S. stocks, CDs, bonds and some foreign stocks. This is moving in the right direction, but why stop there? There are many more asset classes to consider and there is so much more available in today’s investment universe than even 10 years ago. The following investments should at least be considered along with traditional high quality bonds and large-cap stocks:
- Small and micro-cap stocks
- Emerging markets stocks
- Inflation/commodity sensitive equities
- Hedged and non-currency hedged foreign bonds
- Emerging markets bonds and currencies
- Floating rate/bank loan securities
- Distressed debt
- Inflation-adjusted bonds
- REITs and foreign real estate
- Arbitrage and hedged strategies
Any one of these less traditional investments may only constitute a few percentage points of the portfolio, but when you add up a dozen or more of these, they do have a profound effect in aggregate, just as theory predicts.
To successfully design and maintain a portfolio to the appropriate risk level requires experience, training and strong knowledge of theory and practice. Expected return, upside versus down-side risk, correlation, and expected sensitivity to various factors (e.g., inflation, interest rates, energy prices, competition, global growth, trade and budget deficits) are just some of the attributes to be considered in determining relative investment attractiveness and weighting within a specific risk-target portfolio.
With more than 145 years of combined investment experience, the professionals at WESCAP Group are ready to translate their financial expertise and discipline into your personal financial success.