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...
