BUILDING WEALTH FOR TOMORROW
The reasons individual investors have for wanting to set aside money are as varied as their goals. Whether it be putting a child through college or traveling the world in retirement, those goals become a part of you. In order to create an investment plan out of those objectives, you must wade through a minefield of options about how to go about investing your money. Market upheavals and an array of seemingly ominous world news complicate the effort and could lead to investment decisions based more on fear and emotion than solid analysis and opportunity.
At Peterson Financial Services, LLC, we help our clients meet these challenges by crafting customized accounts uniquely tailored to your needs. We know experience and expertise about the markets can add significant value while reducing risk. Our strategy of combining in-depth analysis with discipline delivers wealth-building results.
WHAT IS CUSTOMIZED PORTFOLIO MANAGEMENT?
Customized Portfolio Management allows us to shop the marketplace for investment vehicles accurately suited to your unique objectives. Rather than being locked into proprietary choices, or constrained by the need to control transaction-based expenses, Peterson Financial Services, LLC has the flexibility to make choices in managing your account solely based on its advantage to the value of your holdings. We implement tactics to control risk while improving returns.
Because each investor completes a profile questionnaire, we address the unique aspects of your financial needs to determine the correct portfolio type best suited to you. This portfolio type reflects specific asset allocation guidelines ensuring the investor will not be assuming any more risk than is appropriate for them.
Our discretionary approach to portfolio management includes a disciplined strategy that protects the portfolio from detrimental, emotional decisions. You benefit from the experience and expertise we have as professional money managers, allowing you to concentrate on what you do best: your specific vocation.
Our fee-based method of compensation places us in alignment with your goals. We don’t make money for moving money, we make money on the value of the account. Therefore, we both want the account to grow. And, you pay as we go, so you don’t feel trapped into having paid large, up-front commissions. Our access to a variety of investments often leads us to assets which can only be secured by institutional investors. Often, these come at internal cost structures which are more favorable than retail shares, and you directly benefit from that cost savings.
The Investment Process
CONFIDENTIAL CLIENT PROFILE
We begin by asking you questions about your experience, risk tolerance, biases, coordination with other aspects of your financial life, objectives, and time horizon.
PORTFOLIO SELECTION AND INVESTMENT POLICY STATEMENT
The Client Profile leads to the establishment of the type of portfolio which is appropriate for you. The various portfolio types are distinguished by their asset allocation. This ensures we follow guidelines that prevent us from making investment decisions inconsistent with your wishes.
In conformance with your Portfolio Selection, we craft a custom portfolio designed to integrate your risk tolerance with your growth or income objectives. We actively manage the portfolio to continuously take advantage of the opportunities the market provides us, while avoiding the steep losses which can negatively impact your returns. We utilize a variety of investment vehicles which may include individual issues, institutional funds, sector funds, specialty funds, exchange traded funds, closed funds, traditional no-load funds, or load funds at net asset value.
MONITORING AND REVIEW
We continuously monitor our client holdings and make adjustments to the portfolio as needed. We also provide regular reporting, reviews at intervals appropriate for each client, quarterly newsletters, and frequent commentary updates on our website. Additionally, we make every effort to be accessible for unlimited telephone consultation.
Our philosophy consists of having adequate cash reserves to allow for minimal disturbance of long-term investment funds, as a prelude to building net worth. We approach wealth accumulation through a balance of equity and fixed assets using asset allocation to establish how a portfolio should be divided among various asset classes. We then develop the strategies to be utilized which guide the implementation of the asset allocation. We utilize “tactical asset allocation”, which allows us to underweight or overweight certain asset classes as we suspect they will perform. The final decisions made in this process are the specific investment vehicles. We work hard to find quality, appropriate investments from the beginning so that we are not constantly turning over the portfolio. However, all accounts are actively managed. We know certain asset classes and individual sectors are either in favor, or out of favor at any given time. By manipulating these divergences, we can both reduce risk and increase returns.
We know that markets are often irrational and cannot be predicted. Therefore, we don’t try to predict them. Rather, we let the market tell us what it is doing and work to exploit those movements.
We also know that long term, markets are driven by fundamentals and correctly understanding those fundamentals will give us an edge. Certain conditions in the economy and geopolitical scene lead to certain reactions in the market. Analyzing these conditions accurately leads to superior performance.
Additionally, investors must strike a balance between liquidity, risk abatement and growth of wealth. Systematic and deliberate strategies will lead to the most satisfactory results.
While most money managers utilize some variation of Modern Portfolio Theory, Peterson Financial Services, LLC takes this one step further to incorporate what we call “Tactical Asset Allocation”. We employ fundamental analysis to determine which asset classes are strong potential performers, along with specific investments we are interested in placing in the portfolio. We also rely on technical analysis to help us ascertain general market health and direction, and identify themes emerging in the marketplace and assist us on the timing of our purchases and sales.
We then determine our asset allocation by deciding how to divide the account between value and growth, different capitalization sizes, domestic and international, fixed income and equities, and many other variables. Using these basic decisions, we construct a portfolio around “core” versus “traded” holdings. Core holdings are more of a buy-and-hold nature. These are assets forming the foundation of the portfolio and are generally held during a mix of market cycles and behaviors. Traded holdings are more specialized and are used to exploit more temporary or specialized conditions in the marketplace. These may be more volatile and could be assets that are very beneficial at times, but we will want to divest from when they fall out of favor.
We take into account trading costs and expense ratios in funds, and the tax consequences of sales in taxable accounts. But, we do not let the tax or expense tail wag the investment dog. If a more expensive fund results in greater net gains, or the marketplace is indicating an asset must be sold to preserve capital, we make those decisions for the benefit of the portfolio. We believe willingness to be nimble and flexible will yield further gains.
We do not attempt to guess how the market will perform, either in the short-term, or long-term. This cannot be consistently, successfully done, and attempting to do so, generally results in being wrong. Rather, we let those technical indicators give us clues as to what the market actually is doing – often contrary to the “smart” money’s expectations. Thus, we generally fully participate in up-trends – even if we wouldn’t have guessed market conditions would be favorable, and lighten up in corrections so we don’t fully participate in all the losses – even if we think the market is attractively valued.