Investments

It is very difficult for any financial advisor to ensure their clients of portfolio performance. However, advisors can control their clients investment fees and exposure to taxes, which can significantly erode returns in the long run. For this reason, we employ a core-satellite approach to investment selection. The core-satellite concept recognizes the fundamental difference between index and active fund management and combines the best aspects of both approaches. Using index funds as the ‘core’ of your portfolio gives an investor a low cost, more tax effective and diversified portfolio, while carefully selected lowly correlated actively managed ‘satellites’ can complement the core by giving potential to outperform the market. The percentage of index funds used in a portfolio varies based on the asset allocation selected for the individual. Index funds can take the form of a mutual fund or an exchange traded fund (ETF).

Indexing the 'core' of your portfolio has a number of key benenfits:

Low cost - index funds have lower ongoing fees than most active managed funds investing in similar assets. They also tend have lower portfolio turnover resulting in lower ongoing trading costs.

Tax efficient - the lower portfolio turnover of index funds not only reduces costs but reduces tax liabilities aswell due to their buy and hold strategy. Actively managed funds tend to buy and sell more frequently (high portfolio turnover), creating taxable gains that are ultimetly distributed to investors. Learn more about Tax Management.

Competitive long-term performance - indexing has historically delivered competitive long term performance at a low cost. Few active managers have been able to sustain consistent above index returns after costs and tax over the long run.

The satellite positions of the portfolio also provides some important benefits:

Reduced correlation - the selection of satellites should have a low correlation to the core positions resulting in reduce volatility of the portfolio.

Tactical view - Satellites can represent ideas that may present themselves in certain market environments and/or regions or countries of the world. They can be used to overweight certain sectors, asset classes, or investment themes that present some opportunity beyond trying to outperform the indexes with traditional stock picking.