Category Archives: Portfolio Construction

Classy and Fabulous Investing

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Time speeds by quickly, seemingly by design.  Fashion Week is again in full swing, and the Fall 2013 collections feature deep, rich colors and sleek lines.  Some things never go out of style, such as the basics of building a great portfolio.  Attached is a copy of an article I wrote during Fashion Week for this Sping, enjoy!

Mercedes-Benz Fashion Week, highlighting designs for Spring 2013, is in full swing in New York.  The colors and styles of the clothing, the beauty of the models, and the unique personalities of the designers represent a sensory explosion of diversity.  There is something to glean from this event for both beginning and advanced investors.

The Closet:

My closet has way too many pairs of jeans, a good balance of fun casual and conservative business attire, and too few pairs of shoes.  Just like our clothing, over time, most of us tend to become collectors of different investments.  It can creep up on you and before you know it you have amassed a good portfolio, but you may be missing some key essentials.  If you started from scratch today and rebuilt your entire portfolio, how would you structure and form your investment mix?  You probably are holding at least a few mistake investments, and some that are sentimental favorites that no longer serve you well.  You do not necessarily need a lot of different investments, just the right ones, and ones that work well together.  Just think, by starting fresh you would have the opportunity to re-invent your portfolio.  The top portfolio managers in the country might have slightly differing opinions about which essentials should be a part of every portfolio but here is a short list:

The Classics:

  • If you are just getting started, consider balanced mutual funds and low-minimum certificates of deposit
  • Basket of dividend paying-large cap stocks
  • Actively managed small cap and international mutual funds

Accessories:

  • Short-Intermediate term bond ladder of AA/AAA GO municipal bonds (essential purpose revenue bonds for larger or complex portfolios)
  • For longer term dollars, build in core classics as above, then blend growth stocks of great brands/cutting edge companies (take advantage of lower capital gains tax)
  • For very high-net worth individuals, consider selling covered calls against large stock positions to generate extra income
  • Private funds such as the Pawleys Dividend Fund and Pawleys Growth Fund for SEC Accredited Investors

One of my favorite aspects of investing is that you can take a customized approaches, just as you can in building a wardrobe.  South Carolina municipal bonds are good for South Carolina residents, while residents of other states can find local issuers in their area. Start by sticking to some core basics, and then have a blast accessorizing.  Coco Chanel said “A girl should be two things: classy and fabulous.”  Make your portfolio both classy and fabulous and “invest right, live right!”

© 2012-2013 Pawleys Investment Advisors, LLC.  All rights reserved.

The Investment Policy Statement – Roadmap to your Portfolio

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By adding just a little structure to your approach, you can really supercharge your investment results and feel more empowered so you can relax during bumpy markets. The market actually behaves in a very predictable and consistent way – it is the response of investors to various conditions that is unpredictable and interferes with goals. The Investment Policy Statement is a critical tool to help investors manage themselves and their responses, which is the most important component of a successful investment plan. Of the people who may fall short of their goals, for most it is not because their savings rate fell short, but because they received bad advice from an inexperienced advisor and sold out of the stock market during the drops of 2000-2001 and/or 2008-2009. Many people refer to these bear markets as the crashes following the dot-com and real estate “bubbles,” but they actually occurred during recessionary periods which were signalled by several economic indicators. So, by having a well-developed Investment Policy Statement and the advice of an expert Registered Investment Advisor to navigate changes in the economy, your roadmap to success will be rock-solid. Let’s look at the components I include in the Pawleys Investment Policy Statement:

Purpose: This section outlines the reason we use this document, and contains wording that is designed to generate open conversation. The main purpose of the document is to keep us, as a team, focused on longer term investment objectives.

Investor Profile: The Investment Policy Statement is used in concert with the Investment Advisory Agreement, which outlines the roles and responsibilities of each party. The Investor Profile section outlines the financial situation of the client, timeframe for investment goals, risk tolerance, types of accounts included, and other important information.

General Investment Philosophy and Objectives and Risk: Portfolios can be designed with varying levels of conservatism or aggressiveness, and this section details the agreed upon approach.

Return Requirements, Time Horizon and Asset Allocation: The return requirements will be based upon historical returns of model portfolios with the same asset class mix of the designed portfolio. This section also outlines the timeframes for stated financial goals. Specific percentages for the asset class mix are outlined in the section.

Portfolio Performance: This section specifies exactly which benchmarks will be used to evaluate portfolio performance.

Investment Policy Review: At a minimum, I recommend annual portfolios reviews to assess quality of investments, fit within the portfolio, and the overall performance and risk of the portfolio. This is also a good time to discuss any need to change course. Major unexpected life events through the year may cause the need to modify the Investment Policy Statement as well.

We sign this document and use it as our roadmap. Again, it is an important tool for me to communicate with clients, and it also helps them feel more empowered as investors so they can relax. The markets are very consistent in their behavior, and when investors learn to temper their reactions and behave in a consistent fashion as well, they are well-positioned to surpass their stated goals. 🙂

© 2013 Pawleys Investment Advisors, LLC. All rights reserved.

Classy and Fabulous Investing

Posted on by

0

Mercedes-Benz Fashion Week, highlighting designs for Spring 2013, is in full swing in New York.  The colors and styles of the clothing, the beauty of the models, and the unique personalities of the designers represent a sensory explosion of diversity.  There is something to glean from this event for both beginning and advanced investors.

The Closet:

My closet has way too many pairs of jeans, a good balance of fun casual and conservative business attire, and too few pairs of shoes.  Just like our clothing, over time, most of us tend to become collectors of different investments.  It can creep up on you and before you know it you have amassed a good portfolio, but you may be missing some key essentials.  If you started from scratch today and rebuilt your entire portfolio, how would you structure and form your investment mix?  You probably are holding at least a few mistake investments, and some that are sentimental favorites that no longer serve you well.  You do not necessarily need a lot of different investments, just the right ones, and ones that work well together.  Just think, by starting fresh you would have the opportunity to re-invent your portfolio.  The top portfolio managers in the country might have slightly differing opinions about which essentials should be a part of every portfolio but here is a short list:

The Classics:

  • If you are just getting started, consider balanced mutual funds and low-minimum certificates of deposit
  • Basket of dividend paying-large cap stocks
  • Actively managed small cap and international mutual funds

Accessories:

  • Short-Intermediate term bond ladder of AA/AAA GO municipal bonds (essential purpose revenue bonds for larger or complex portfolios)
  • For longer term dollars, build in core classics as above, then blend growth stocks of great brands/cutting edge companies (take advantage of lower capital gains tax)
  • For very high-net worth individuals, consider selling covered calls against large stock positions to generate extra income
  • Private funds for SEC Accredited Investors

One of my favorite aspects of investing is that you can take a customized approaches, just as you can in building a wardrobe.  Start by sticking to some core basics, and then have a blast accessorizing.  Coco Chanel said “A girl should be two things: classy and fabulous.”  Make your portfolio both classy and fabulous and “invest right, live right!”

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.