Our investment philosophy is built upon four main pillars:
- The value of diversification
- Keeping fees as low as possible
- The value of passive investing
- Modern practices and automation
A diversified portfolio invests in a diverse pool of asset classes in order to create an investment strategy that seeks to have collectively lower risk than if you were to solely invest in any one individual asset. Diversification allows us to build portfolios properly tailored to each client’s preference attempting to maximize returns at their preferred level of risk.
Low fees allow investors to not only keep more of their hard-earned money, but also keep more of it working for them in the markets. This provides the added benefit of compound returns or the phenomenon of growing your money faster through generating returns on top of previous earnings.
Lower fees are incredibly important. Take the example of two portfolios, both earning 7%. Now imagine that one portfolio has a 0% fee structure and the other has a 2% fee structure making the net return 5%.
If both portfolios were to have an initial investment of $100,000, over a 30-year investment horizon, the portfolio with zero fees will earn $300,000 more than the portfolio with a 2% fee structure.
Note: This example is presented for informational purposes to convey the impact of hypothetical fees and does not represent the return earned by any individual, Managed Portfolios clients or otherwise. These projections imply the full reinvestment of dividends and are presented in nominal dollars - that is they do not take into account inflation. Economic and market conditions will influence actual returns earned by investors. Investments are not guaranteed and may lose value.
Passive investing refers to building portfolios that are designed to grow with the market long-term instead of trying to chase short-term fluctuations. Research continues to show that by shunning the high stakes game of active stock picking, investors can rise above psychological biases to capitalize on the growth of the markets.
Nobody actually knows what the market will do tomorrow, next week, or a year from now. While it is tempting to "time" the market, it is much better to get your money invested sooner rather than later to take advantage of the rise in the markets. For example, investors that entered the stock market by buying an S&P 500 ETF at the record peak of the S&P 500’s value on October 11, 2007, would have lost substantial value. However, had they retained their investments, they would have earned 18% as of the end of 2013. (Google Finance: www.google.com/finance)
Modern practices and automation
We use the tools of Modern Portfolio Theory to design portfolios which target (but do not guarantee) the highest level of return a given level of risk. Further, with our technology that allows the purchase of fractional shares of ETFs, even investors with a modest investment amount can have a fully diversified portfolio. Finally, our re-balancing engine seeks to maintain your portfolio at the desired allocation and attempts to minimize tax consequences through efficient tax lot management.
Axos Invest, Inc., and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Axos Invest LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.