Asset management as it relates to wealth accumulation and preservation is the cornerstone of services at NFPS.

Because it is so important to your long-term financial health, we take this step of the process very seriously.  Effective investment planning is no accident. It requires thoughtful and rigorous analysis, including strict adherence to time-tested and proven strategies.  Additionally, on-going monitoring of both your personal situation and your portfolio's performance are critical to achieving success in any investment program.

 

To implement the components that form the foundation of our investment services, we:

• Develop a comprehensive investment program based on your specific goals

• Implement the strategy with appropriate investments

• Conduct systematic monitoring of your portfolio to ensure it will meet your objectives

   

Nelson Financial Planning Services' Investment Philosophy Adheres to the Following Pillars of Modern Portfolio Theory:

 

1)  Markets are efficient. Markets process available information so rapidly to determine the price of any security that it is extremely difficult to achieve a competitive advantage by exploiting occasional anomalies. In order to "beat the market," investors must possess not only the correct insight or information regarding a specific security, but they also must be the only investors to possess it.  Furthermore, they must be able to do this consistently over time.

Numerous academic studies have shown that there will be some managers that "beat the market," but to reliably predict who those managers are is nearly impossible. NFPS applies this philosophy to the range of diverse investments it utilizes for your portfolio.

2)  Exposure to risk factors determines investment returns.  Numerous, well-documented academic studies confirm that an investor's return is predominantly dependent on the amount of exposure to specific risks associated with various asset classes. In other words, high potential returns involve high potential risks. There are no low-risk and high-return investments that can be sustained over an extended period of time.  Investment risk comes in many forms, but most investors equate risk with the potential for losing investment capital and the length of time for the loss.

Over time, riskier assets provide higher expected returns as compensation to investors for accepting greater risk.  This is the basic concept underlying Harry Markowitz's Nobel prize-winning strategy for the efficient frontier that has become the new legal standard for prudent investing by fiduciaries.  The core of NFPS'investment discipline is based on analyzing the available long-term data to identify the best investment solutions.

3)  Importance of Diversification.  One of the keys to building a successful portfolio is diversification, or spreading your assets among a number of diverse investments.  Diversification increases your portfolio's growth potential while helping to lower the risk that one of your investments will lose value and wipe out a significant portion of your savings.  The key to diversification is the old adage, "Don't put all of your eggs in one basket."

Adding low-correlating asset classes, even if they carry a higher risk individually, can actually reduce portfolio volatility and increase expected rates of return.  By intentionally designing portfolios to incorporate various degrees of exposure to different asset classes, NFPS can help investors create efficient portfolios for the level of risk they are willing to assume.

4)  Keeping taxes and fees to a minimum ultimately increases expected returns.  Utilizing a majority of active portfolio managers is inherently expensive due to the following:

          *  Higher trading costs
          *  Much higher management fees
          *  Dilution from maintaining higher cash positions
          *  Tax drag in taxable accounts due to high turnover rates
          *  Commissions, if an investment "product" is purchased through a
             broker/salesperson

All these expenses reduce investment returns.  The costs of active management can create a handicap for active investors in the range of 2.5% to 9% per year, depending upon asset class mix, and whether a salesperson is involved.  The least expensive form of active management, no-load mutual funds and "wrap fee" accounts, can also consume more than 2.5% per year from investor's returns.

Most importantly, active portfolio managers are susceptible to style drift, a commonly observed trait of skewing a portfolio's asset allocation to chase recent high performance of specific securities.  NFPS primarily employs structured, institutional asset class pooled accounts, exchange traded funds, active portfolio managers, individual stocks, and fixed income securities to fund your portfolios.  These types of investments have a strict adherence to their asset class.

So, if you are concerned about:

          ...Whether your "diversified" portfolio of mutual funds really is diversified
          ...How your investments are performing compared to the rest of the market
          ...Having the right investments to achieve your goals
          ...Paying too much in taxes as a result of your investments
          ...How objective the advice is that you receive from your broker
          ...Trying to chase last year's winner only to be disappointed

Please contact us. We look forward to talking with you.