Investment Results May Vary With Investment Management Style Chosen

Our research of reward and risk over this turbulent market period of the last three years indicates that how a portfolio is managed determines in large part the results the investor obtains. We usually think that, if we could simply pick the right stocks, we will weather the market storm well. Good selection is important, but not as much so as management style!

Well, here's what we found:

• Our discretionary accounts are more efficient than non-discretionary accounts. Discretionary means the investment manager makes decisions and implements them immediately when the research indicates those changes should be made. This also includes regular portfolio re-balancing back to the originally agreed upon portfolio model.
  
  Non-discretionary management means the manager must check with the client before every transaction to gain agreement. When the delay and indecision of non-discretionary management was eliminated, efficiency of management in every respect went up.
  
  
• Balanced portfolios provide better risk protection than unbalanced portfolios. This has been true in all time periods, and over a market cycle (usually three to five years) the difference is quite pronounced. For example, the portfolios that were unbalanced during the late 1990s with telecom and high tech issues showed initially high returns, and then were later significantly impaired because of the unbalanced weightings of those industry sectors. Diversification isn't enough. You can own many securities, but if they are concentrated in too few industries and sectors, the portfolio will suffer in a downturn. An investor must employ all appropriate asset sectors to gain better balance.
  
  
• Professional management is preferable to a do-it-yourself methodology. Most folks just aren't adequately equipped via experience, education, temperament and analytical tools to go it completely alone.

This article is for informational purposes only and not intended as financial advice. Consult your financial advisor to determine what is appropriate for your situation.
Past performance is no guarantee of future results.

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