We often discuss value when it comes to investing, simply because it does not make sense to buy assets that are over-valued (and buying assets that have a greater chance of coming down in price in the near-term is a high risk proposition). So we do a significant amount of research to determine where there might be value before deciding to make a purchase.
In (High Rock's) Our Voluntary Code of Conduct for the Stewardship of Your Wealth under the heading Investment Management:
We will always
Manage risk first. Strong risk-adjusted returnsare the result of properly managed risk
That is why when a new client transfers their hard-earned savings into our care, we don't just run out and buy a set basket of ETF's just to get them fully invested immediately, without first stopping to determine whether the prices they are paying make any sense.
It is the same when an existing client transfers in new cash.
It means that we have to do a great deal more work in making our determination as to what and when to buy, but from our perspective, that is what we are being paid to do.
Any advisor can get you fully invested immediately. As we discussed on this blog last week (http://highrockcapital.ca/scotts-blog/discretionary-or-non-discretionary), that likely ends their legal obligation to you (but they may still charge you an on-going fee).
Might our more tactical approach take a little longer to get a client fully invested? Quite possibly, but over time our clients will be less vulnerable to the swings in market prices (volatility) which means that the key factor for compounding year to year growth (stability) is easier to achieve.
Ultimately it is compounding (and active re-balancing) that will be the reasons for long-term growth to achieve your target annual average returns.
Finding value then becomes one of the important ingredients to a stable, long-term rate of growth (better risk-adjusted returns) in your investment strategy.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist