As mentioned in other sections of this site, we define successful investing as simply achieving the goal you set at the outset. Once identified, an investment portfolio is constructed to work towards the goal. To many people, it is at this point, investment selection (i.e., “picking stocks or mutual funds”) is investing. Nothing could be further from the truth.
For us, there are three parts to investing, they are:
I. THE INDEX+ STRATEGY
Before you can invest, you have to have an investment strategy you can count on and established expectations of this strategy. For us, our strategy is to invest a portion of a portfolio's assets in passive investments, mainly index funds & ETF’s; and the remainder of assets into actively managed funds. Our expectations for this strategy is to give our portfolio an opportunity to outperform the stock market index benchmark without the prospect of drastic underperformance.
II. INVESTMENT SELECTION CRITERIA
Once you have an investment strategy you must establish the criteria for investment selection. For us, we focus on fundamentals when selecting investments. Quite an “old school” approach but one that works. Focusing on mutual funds, we look for the attributes in the triangle to the right and believe it or not, using our screening criteria we eliminate 90% of mutual funds out there. Being highly selective, we can then focus in on the best of best mutual funds for our portfolios.
III. PORTFOLIO MANAGEMENT & PLAYBOOK
At the crux of our portfolio management is to diversify with a purpose. We are adamant in having a collection of investments that work together. Once we have that, we continue to monitor the portfolio and apply the core tenets of our “Playbook” on an ongoing basis. Constructing a portfolio puts the goal within reach. Managing the portfolio is what gives you a shot at achieving the goal. The tenets of what we call our Investor Playbook guide us in our portfolio management.