Investment Philosophy

Investment Philosophy

Wealth Care LLC maintains the following core investment beliefs:

Active Versus Passive

We believe in passive investing in large established markets. We do not think that active fund managers can pick which individual companies will outperform others in a large efficient index such as the S&P 500. At the same time, we will still "tilt" some investments in large efficient markets towards some sectors such as a group of companies that pay higher dividends, or who are "value" priced by various techniques.In regards to smaller and less efficient markets (Asia, Emerging Markets), we are less dogmatic on the issue of active vs. passive investing. If we find managers that have a good long term record, reasonable expenses and an investing philosophy we share, we will use those actively managed funds. Often , we will split funds invested in these markets among passive funds/ exchange traded funds and the above mentioned actively managed funds.Unless one is able to passively reproduce exactly the world's investment choices, a portfolio represents an active asset allocation. Wealth Care LLC actively manages portfolios in the following method:Asset classes that are felt to be statistically or historically overvalued are underweighted or avoided.Asset classes that are felt to offer future value due to trends in geopolitics, supply and demand issues, and demographic changes are included and/or overweighted in portfolios.The remaining asset classes are used in a broad, low cost, diversified manner.

Asset Allocation

We believe that the asset allocation is a significant determinant of long-term portfolio performance. We believe in maintaining a strategic allocation and only infrequently revise that allocation. We do not believe in market timing.

Time Diversification

We believe that the relative risk of increasing equity exposure decreases as the time horizon of the goal increases. We do not believe that any "investment" should be made for a goal with less than a five-year time horizon. Funds required in fewer than five years should be placed in money markets or fixed income securities (e.g., CDs, Treasuries) with maturity dates equal to or less than the goals' time horizons.

On-going Management

We believe that there should be regular review of a client's situation to determine if he is continuing to move in the direction of achieving his goals. This includes revisions in strategic allocations as a result of revised assumptions or changing client circumstances or goals. Our responsibility is to assure that our client "stays the course" and does so with a minimum of emotional pain. We believe that the focus should always be the client and the achievement of his goals, not the performance of the portfolio. For example, the marked downward trend in prices of stocks in 2008-9 made many investors aware of their emotional response to the change. Wealth Care LLC revised the asset allocations of several family's portfolios after prices had recovered to coordinate with that new information.

In Summary

We believe that although you cannot control the performance of the market you can control the expenses you incur when you invest and the timing of the taxes you pay as you invest. We believe that you can regulate the amount of risk that you take with an appropriately diversified portfolio of cash, bond and stock funds. We recommend no-load, low cost, tax-efficient (when necessary) mutual funds in an effort to minimize expenses and negative tax consequences. We believe that investing in a well-diversified portfolio over the long-term with low expenses and high tax efficiency is the best way to achieve your goals.

Investing Truisms

1. Over long periods, stocks will have greater total returns than bonds. There is ample evidence to demonstrate that, over time, stocks perform better than bonds. It is an economic principal that increased risk must offer increased return, or no one would willingly take the risk. The premium is the excess return (compared with the less risky alternative) that investors receive in return for accepting the risk. Wealth Care LLC believes this is even more true given the extremely low rates of bond returns currently.

2. Over long periods, bonds will have greater total return than money market investments. Numerous charts support the assertion that bond total returns are greater than money market returns. This can be violated when the yield curve is inverted, but under normal economic circumstances, the individual willing to lend his funds for long periods receives a premium for the risk taken.

3. Over long periods, money market returns have been close to the rate of inflation. This is important to realize if your only goal is to keep pace with inflation. This fact is complicated by the fact that different families see different rates of inflation depending on their levels of wealth and age. After taxes and inflation however, money market rates usually result in a steady loss of purchasing power.

4. On average, stocks are much more volatile than bonds. Ibbotson's data for 1926 through 1999 suggest that in any given year there is roughly a 30% chance that the broad-based stock market will be down rather than up. But, see point 1. if you have a long time horizon.

5. On average, bonds are riskier than money markets. When the prices go down, you may feel that you can hold on until the bond matures, but the reality is that bond total returns are negative almost as frequently as stock returns. They do not lose the same percentage of value as stocks (but also do not have the positive potential).

6. Someone, or some group of people, will always do better than you over a specific time period. This is easy to understand. Anyone who researches past performance can find an index, mutual fund, or individual investment that did better than what they owned. It is a human characteristic to "look up" at those who make more money, or who made a "killing" in some investment, while forgetting the majority who are worse off.It is Wealth Care LLC's commitment that your investments will match your long term goals. Our job together is not to beat the markets or your friends' investments, but to make you successful in achieving your specific financial aspirations. In this, we have no doubt you will ultimately do better than most.