Our Investment Philosophy is exemplified in what we call the Rounds Market LEADER Philosophy. LEADER is an acronym for:
This philosophy is enshrined in our trademarked product, the CaMDAR Investment Model.
Long Term - Our practice specializes in long-term investment. We feel it is important to set goals and objectives and then institute a plan to meet those objectives. At Rounds Financial Services we view time as an ally while we are in the wealth acquisition phase and we want to use it wisely to help us meet our goals. Once we have accumulated our wealth and are in our spend down phase of our life cycle, we should also consider also take a long term view so we do not exhaust our wealth prematurely.
Early Start - Most investors know the earlier you start investing, the less you need to invest in order to reach a long term goal. Although we know this principle we often either fail to take action or simply feel we are not in a position to make contributions to address our long term needs. At Rounds Financial Services, we will work with you to help you prioritize expenditures in an attempt to find ways to fund your long term needs. The major tools investors have to grow wealth is Time and Money. Time is an ally but it is useless if there is no base to invest. If you consider starting as early as possible and the pain may be less and the rewards may be greater.
Attribute Driven - This means you should consider investing based on your personal attributes or characteristics and also consider taking into account market attributes or conditions. The key personal attributes are your age, objectives, your liquidity needs, time horizon, risk tolerance and investment objective. These attributes are extremely personal. Would you want your investment be driven based on your attributes or the attributes of a friend, relative or those your advisor? Market attributes may also play a role in driving your investment decisions. If the overall market is trading at historical multiples of earnings; that may be a warning sign to be a bit less aggressive. Bottom line is that you should consider making your investment decisions based both and the investor's attributes and market attributes.
Diversified Holdings - Our investment objective is to get the client the best return for their specific level of risk. If we can reduce risk while holding return constant or if we can increase return while holding risk constant we want to do this. One way of reducing risk is to be diversified. We want to consider both vertical and horizontal diversification. An example of vertical diversification is having holdings from multiple market segments; much deeper than just stocks versus bonds. Stocks can be large companies, midsize companies or small companies. They can be US stocks, developed international stocks or emerging market stocks. Bonds can be long term, short term, high quality or low quality. One should also consider the need for alternatives such as precious metals and real estate. Horizontal diversity is associated with having many holdings within a specific vertical category. For example, we may want to hold several small cap holdings as opposed to 1 or a few. Trying to maintain a portfolio consisting of individual stocks and bond holdings that is diversified across multiple sectors can be extremely onerous. Our approach is to consider the use of mutual funds when not in a managed account and the use of Exchange Traded Funds (ETFs) when in a managed account.
Expense Conscious - Every basis point you can reduce in your investment expense is an increase in your net return (holding all other things equal, or "ceteris paribus" as an economics professor would say). Fees, commissions and incidental charges if not watched can do serious damage to your returns. Yes, your professional manager deserves some return for his or her effort but be careful not to pay multiple people for providing the same service. Our belief is that markets in general are fairly efficient. Having a 3rd party charge you significantly more in fees in an attempt to "beat" the market only makes sense if the marginal expense paid is outweighed by the marginal increase in return. Of course you do not know what the increase in return (if any) will be when you enter into such a relationship. Our philosophy is to "be" the market rather than to "beat" the market for most clients. There are exceptions to this and it again is investor specific. If an investor has a higher risk tolerance or needs to meet a specific investment level (increasing marginal utility for returns) he or she may be willing to pay for an opportunity to "beat" the market. For the vast majority of the remainder of our clients, we may just want to "be" the market at a reasonable cost. If we are trying to beat the market, we feel it may be difficult to do so by picking individual stocks. The market is efficient and sometimes too efficient. Although there are laws against insider trading, sometimes it appears that news affecting stock prices is acted on before the general public is aware. So our position is to stay away from individual stock purchases. We do believe that it is easier to identify sectors that that can outperform other sectors than it is to find stocks that will outperform other stocks. In some cases it may make sense to pay additional fees to professionals that may have an insight into what sectors may be better to invest in or possibly that it is better to sit on the sidelines and wait for buying opportunities. For the other investors we may just try to "be" the market at a reasonable cost.
Rebalance Periodically - Rebalancing is a key strategy in any portfolio. Rebalancing means resetting your investment mix to your desired distribution. By periodically rebalancing one has the opportunity take advantage of market shifts and in doing so can result in your cost basis being lower on average than those who do not rebalance. The CaMDAR® Investment Model relies on periodic rebalancing as a means to manage the portfolio. For example if you invest 5% of your investment in Large Cap growth and 3% in gold and then large cap growth increase relative to gold so that it is now 6% of your portfolio and gold is at 2%, you would sell large cap growth to 5% and buy gold back to 3%. Then at the next rebalance if gold had risen relative to large cap growth so that both are now 4% of your portfolio, you would buy large cap growth and sell gold. You are engaging in the practice of buying low and selling high.