Over the years, we have seen countless headlines, political rhetoric, and policy shifts that have shaped both economic outcomes and investor behavior in the equity market. These cycles often create uncertainty, lack of clarity, and, in many cases, outright fear. However, in every market environment, we focus on two things we can control: our process and behavior.

By leaning into these core principles, we can provide clarity, confidence, and a structured decision-making approach.

Our Process

The foundation of our approach is financial planning. A well-structured plan, based on conservative assumptions—such as low returns and high spending—allows us to ensure long-term financial security.

From this planning process, we gain a clear understanding of your cash and capital needs, which we use to construct a portfolio designed to outpace return assumptions and keep you ahead of plan.

Portfolio Construction: Balancing Safety and Growth

We structure portfolios with two key components:

1. Safety – Sufficient assets to protect you and your family, ensuring stability.
2. Growth – Investments designed for long-term appreciation and tax efficiency.

As you approach retirement or require more income from your portfolio, we increase the allocation to safety—typically to a level covering three years of income or capital needs. The remaining balance is allocated to growth.

Growth: Investing in Quality

Our growth investments focus on the highest-quality companies, characterized by:

• High barriers to entry
• Strong return of capital to shareholders
• Predictable and above-average earnings growth
• Healthy gross profit margins
• Exceptional balance sheets

We conduct rigorous screening to ensure each investment meets these criteria.

Disciplined Buying and Monitoring

Once we identify businesses we want to own, we determine their intrinsic value and establish acceptable price entry points—often with multiple opportunities to buy.

We continuously review our holdings, especially during volatile markets, when fear-driven selling often creates opportunities to buy great businesses at attractive prices.

Additionally, we assess macroeconomic conditions—including overall economic trends, central bank policies, and industry pricing—to optimize portfolio positioning.

By adhering to this process, we aim to:

1. Outperform your financial plan

2. Protect your standard of living

3. Grow your wealth in a tax-efficient manner

Our Behavior: Staying Rational Amid Uncertainty

Our behavior is grounded in math and logic, helping us navigate market uncertainty without emotional decision-making.

Key Principles That Guide Us

• Stock Prices Follow Profits: A company’s value is driven by its ability to grow profit. As the chart below illustrates, historically, the S&P 500’s profit and share price growth have followed a 7% annualized slope over 75 years. When we know a company’s earnings growth, we can easily determine what price we are willing to pay for those future earnings.

 

 

• A Bias Toward Growth: The table below provides insight into the performance of growth companies and how the style has ranked. It has consistently performed well, ranking in the top three asset classes 80% of the time over the past decade.

 

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• Market Timing is Risky: Volatility is the price we pay for long-term growth. As the figure below illustrates, if an investor misses just the best 10 days each year, historical S&P 500 returns turn negative. Staying invested is crucial.

• The Rebound Effect: The steeper the market decline, the stronger the recovery. It is like pushing a beach ball under water - the bounce back is determined by the degree of downward pressure. Historical data shows that after an average 11% market drop, equities recover 22% within 12 months, granted there is a significant range of draw downs (6% to 24%)

The Best Advice During Market Volatility? Ignore the Noise.

Markets move from the lower left to the upper right over time. Our process and behavior enable us to:

1. Stay invested

2. Own the highest-quality companies

3. Take advantage of mispriced opportunities

4. Keep you well ahead of your financial plan

Lastly, one of the most valuable actions you can take during turbulent times is to ignore your portfolio. Watching it too closely can trigger emotional reactions—something we work diligently to eliminate from our decision-making.