We use exchange traded funds (ETFs) and a few open end mutual funds to invest in stocks. This is a cost effective way to obtain diversification. The ETFs track indices. The mutual funds and SMAs are actively managed.
Given the changes in the investment world in the last twenty-years we believe it prudent to diversify client holdings across currencies, countries and market caps. We want to keep volatility low by using index principles to manage exposures to any particular market sector or country within limits.
Most of our stocks are purchased using ETFs to take advantage of low cost and straight forward income tax treatment. We particularly like ETFs that purchase stocks with dividends and records of earnings growth. For a few selected areas such as China, we use open ended mutual funds that are actively managed.
Cash is invested in high quality money market funds, U.S. Treasury Bills and short term bond funds.
For fixed income, we use high quality municipals, insured CDs and government bonds in laddered maturities.
Jeff Sprowles and Associates, LLC
Fee Only Financial Planner and Investment Advisor
Our goal is to meet clients’ long-term objectives within the constraints of individual risk tolerance, market conditions and our outlook for the future. We use a financial model to determine an appropriate mix of stocks, bonds, cash and other investments that is consistent with the client’s goals.
Each account (taxable, IRA, Roth IRA, etc.) in the client’s portfolio is then assigned a target allocation for stocks, bonds and cash. Performance is measured against the corresponding mix of the Standard & Poor’s 500 Stock Index, BarCap Intermediate Government Bond Index and 90 day U.S. Treasury Bills.
We prefer clients to invest in real estate directly. We do not buy REITs. We no longer use hedge funds for qualified investors. Our experience is that these vehicles tend to be more expensive than their returns justify.
It is likely that gold and other commodities are not going to be the big winners they were during the first decade of this century. Until we change this outlook we do not plan to invest in gold or commodities.