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Conservative Wealth Management LLC
Registered Investment Advisor
Philip DeMuth, Ph.D

E-mail: Phil DeMuth
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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How to Invest at Conservative Wealth Management LLC


Q: How do I become a client?
A: Send us an e-mail or give us a call. Let's talk.

Q: What's your track record?
A: If your investment philosophy is to be with whoever had the best returns last quarter or last year, you will be delighted to learn that articles listing yesterday's top performers are a staple of financial journalism. A quick trip to the newstand will show you all yesterday's hot funds to own. Unfortunately, these reports have no predictive validity. If they did, everyone would own only the top performing investments and be rich.

In contrast, the highly diversified investor always owns some of everything. He wishes he owned more of the winners and fewer of the losers, but he recognizes that today's losers are just as likely to be tomorrow's winners. Instead of chasing ellusive returns that always seem to get snatched away like Charlie Brown's football, the sadder-but-wiser approach stresses what is realistically attainable.

Seasoned investors know that returns are only half the story: it is equally important to focus on how much risk you are taking to secure them. The idea is to get the best returns for the least amount of risk.

Our performance is not the result of a magic black box, but follows directly from our investing strategies:

1) Constructing a baseline equity asset allocation to efficiently capture the returns from the global market. This typically involves using Dimensional Funds (DFA) to capture the value and small cap premiums.

3) Diversifying the DFA core with commodities, real estate investment trusts, and other stocks optimize the forward-looking risk-adjusted returns.

4) Adding bonds as necessary to reduce risk in meeting your portfolio's objectives. This involves matching the maturities and credit quality of the bond portfolio to the characteristics of the current yield and credit quality curves.

5) Periodically adjusting the target asset allocation according to the relative valuations of each component asset class, as determined by comparing their valuations today with their valuations historically, while also taking into account momentum effects.

We think that if we pay attention to the downside, the upside will take care of itself. Most of the time, our super-diversified value/small tilt should beat the market indexes, although during the NASDAQ bubble they would have lagged -- at least, until the NASDAQ imploded. Since nothing works all of the time, we think invrestors are better off following a strategy that works most of the time over the long run.

It should go without saying that all portfolios are bespoke and custom-tailored to the individual situation of the investor; investors are not just dropped in some silo to suit our convenience.

In addition to managing long-term portfolios for total return, we also create income portfolios for retirees or heirs seeking the maximum yield from their savings. These approaches are discussed in Yes, You Can Be a Successful Income Investor.

Q: What is your minimum?
A: Typically, one million dollars in investable assets is required to begin a client relationship. An exception might be if an important client asked us to open a small account for his wastrel son-in-law.

Q: What happens when I decide to go ahead?
A: We exchange some paperwork:

(a) We send you a Client Agreement allowing us to manage your accounts.

(b) We send you our Brochure, as required by law. This is not a glossy leaflet describing services, but a document wherein advisors must disclose their criminal backgrounds (if any).

(c) We open a non-discretionary institutional investment account for you in your name at Fidelity, who will send or email you monthly statements and allow you to check your accounts daily on the Internet.

(d) We execute the investment plan that we have agreed upon. You are in control, and nothing is bought or sold in your account without your prior written agreement. With your permission, we deduct our management fees from your account on a quarterly basis.

(e) You can check how your accounts are doing using the state-of-the-art Black Diamond online portfolio performance reporting. Positions and transactions are downloaded, reconciled, and valued daily: you can check your performance yesterday or over any time period you desire. There's plenty of drilldown capabilty as well.

Are you still scratching your head trying to figure out those intentionally confusing paper reports from advisors and custodians? You are going to love Black Diamond, which makes everything as transparent as plate glass.

Q: What if you become incapacitated?
A: In the event of our inability to continue as your advisor for any reason, you will be referred to a backup advisor with a similar investment philosophy so you won't have to sell anything.

Q: But you're in Los Angeles and I live in North Dakota…?
A: With the advent of the Internet, the fax machine, e-mail, the telephone, Federal Express, not to mention the U.S. Postal Service, this does not present any difficulty. We have clients all over the country, most of whom we have never met.

Q: Will Ben Stein be managing my money?
A: Ben is a dear friend and a client, and we discuss the market constantly -- some would say, obsessively. However, he is far too busy topping off his own money bin to manage anyone else's.

Q: Will you please send me a copy of the database (preferably in Excel format) that you use to time the market?
A: No.

Q: What's your outlook for the market?
A: As Bernard Baruch said, "Now is always the hardest time to invest." The recent market meltdown means there are wonderful opportunities for long-term investors, however.

Q: How can I learn more about what you do?
A: Take a look at my writings...

Phil DeMuth in the Media

 
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