This is the sixth post in a series inspired by a Forbes Magazine article that listed a number of questions you should ask a financial advisor.
It is important to ask your investment planner about their process to ensure it fits with your expectations. Not every firm is for every investor so we’ll take this opportunity to share with you how we operate.
The investment process at Sampson Investment Management begins with the belief that managing risk is the best way to maximize returns while minimizing risk over a market cycle.
Unlike more traditional models that have been used over the past 60 years, and tend to stick to pre-determined asset allocations, we believe, and Nobel prize winning research confirms, that making investment decisions dynamically according to changing risk is the best way to approach investment decision making.
This often means making decisions in the short-run that are not in line with traditional asset allocation models. For example, as stocks become over-priced, as they have in recent months, we reduce exposure to stocks, even though they may continue to rise for a period of time. Similarly, we have also reduced bond exposure as interest rates are poised to go higher as the FED begins to reduce the stimulus.
Finally, we are willing to build cash positions in the short run to provide cash for asset purchases once the markets have corrected to more reasonable levels. We make these moves, not because we feel we can time the market, but rather because we are confident that such moves reduce risk and enhance returns in the long run.
In the current market environment where at least a modest correction is taking place, our risk-based approach is doing very well, and we are in a position to be able to take advantage of buying opportunities through the deployment of our cash reserves in the not too-distant future.
Each investor’s tolerance for risk is unique and dynamic. For example, during a time of correction, like we’re having now, it is important not to be reactionary. We take a look at your portfolio over an entire market cycle understanding markets go up and down. If we react to fear, which is everyone’s tendency (How can we be blamed? ) the instinct to move to cash when the market is down means we miss the opportunity when it swings back. This is why our process works and why we advocate meeting face to face annually: To help you win over the long-run.
Our commitment to making decisions based upon risk rather than upon long-term averages defines Sampson Investment Management and our investment process.