Formulating investment decisions around predictions about the market’s current level or its recent performance is a form of market timing that, we believe, will result in a poor investment experience over the long term. Not only is it extremely difficult to do, timing the market — whether speculating on the right time to get in or get out or following the latest investment fad — also can be costly.
At Sonmore Financial, our investment philosophy is an extension of our personal approach to financial services. We custom-build a portfolio from an investment allocation that perfectly suits your needs and goals, using low-cost, tax-efficient structures. Ongoing review and counsel help you make the most of your assets while building financial security.
Early retirement options, estate settlements, retirement planning: While every client need is different, we employ the same proven, consultative process to get results.
The driving force behind investor returns: We employ innovative tools to evaluate client portfolios and position them to achieve investment plan objectives, while limiting concentration and risk.
This includes portfolios with index products, exchange-traded funds, mutual funds, separately managed accounts, individual bonds, and alternative investment classes.
This is an important and often overlooked aspect of investment planning. Once the asset allocation is confirmed, we identify the least tax-efficient investments in the overall portfolio and, where possible, shift to a tax-deferred account or retirement plan.
Our rebalancing process takes advantage of market conditions and keeps the risk of a portfolio in check by rebalancing existing portfolios. Bands are set around each position to effectively manage the return/risk objectives.
While it’s impossible to completely eliminate risk, it’s important to know the process of how funds are trying to generate value and returns to reduce the risk of unintended consequences down the road, especially under volatile market conditions.
Here, we answer questions such as: Who are the actual fund managers? Do they have a strong support team? What we like to see is consistency in a mutual fund’s management team.
Price, the final “P” in our analysis, pertains to how expensive a fund is. The main indicator of price is the expense ratio, typically found in the prospectus.
This step of the analysis refers to the company overseeing a particular mutual fund, which should also have certain characteristics that are appealing to our clients. Common questions we ask include: Does the firm’s suite of funds provide strong returns and overall value to its investors? Has the firm run into legal or financial troubles? A firm that has a grasp of its identity often has a positive effect on its funds, which leads to better outcomes for our clients.
By comparing a fund to the most relevant benchmark and to its category peers, we can then make the best judgement of its performance for our clients’ portfolios.
When analyzing mutual funds, Sonmore Financial operates according to what we call “The Five P’s”: Process, Performance, People, Parent, and Price.
Once we’ve analyzed The Five P’s, our due diligence continues. Managers may come and go, a mutual fund’s performance may be below expectations, and the parent company may fall on hard times. That’s why we continuously monitor for circumstances that could ultimately lead to replacing a fund.
Our Investment Committee meets on a quarterly basis specifically to identify these circumstances. If we are in the process of vetting a new fund, we discuss how the fund will work holistically with the other funds in our portfolio.
We also employ scenario-testing to see how the portfolio could possibly react in a potential bear market, a rising or falling rate environment, a market crash like 2008, and other potential scenarios. Knowing how a portfolio could react in certain economic and market climates is critical to its overall success. Still, surprises can happen. Our disciplined vetting approach and dedicated team greatly reduce that risk.
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Advisory services offered through Sonmore Financial, LLC, a Registered Investment Advisor in the State of Arizona.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.
