HOW WE DO IT!
Our asset selection process begins with fundamental analysis, sector analysis, management overview and finally technical analysis.
The quantitative value of fundamental analysis helps determine the intrinsic value of a company which ultimately determines how likely the company is to succeed. Another important factor to having a successful portfolio is sector analysis. Even the best performing company stock will perform poorly if the sector is under stress. This does not mean a company within a underperforming sector is not a good investment, we just limit the exposure at that time. In my opinion, the most important factor to asset selection is the management team. Just as a great sports team differentiates itself from just a good team with a knowledgeable, experienced and motivated coaching staff, a company is no different. It begins with the CEO, we look at their history, study public reviews and most importantly we listen and watch conference calls and interviews. Finally, after we have narrowed down a strong position, we take a look at the charts. Technical analysis helps us determine a good price point for entry and exit. Ideally, we want to buy low and sell high, tech analysis helps target a price that is undervalued and at the same time if we need to trim some fat, helps target the fairly valued to overvalued price point.
After a portfolio is structured in a manner to achieve the clients goals, it’s not only monitored on a daily basis, but the client will have quarterly reviews with their advisor for any life changing updates, to keep the portfolio in balance.
How We Use the Markets
Everyone worries about losing money. No matter the demographic we have not met anyone who has never expressed concern over lost or wasted money. Unfortunately, equity markets have absolutely no guarantees. Some compare the markets to a casino and in some strategies, this would be an accurate comparison. Some comparative attributes include, risk tolerance, (tables vs. slots) and a variety of vehicles such as dice, cards or electronics. We see this as an unfair comparison because the only history that the casino has is “The House Always Wins.” In the markets, history suggests components of the market (indices) have always increased.
S & P Since Inception Dow Jones Since Inception
This does not suggest that companies or governments do not fail, we all know better than that. The markets vehicles can help us have the odds stacked more in our favor. Assets positioned in vehicles such as ETF’s, ETN’s Mutual Funds or Bonds follow a category, industry or an index to help minimize downturns or on the other hand, help capture more of the market gains over time. The market also allows us to participate and take ownership in individual companies as well. These investments can increase return substantially and at the same time create just as great of a loss. However, there is much more history that can be accounted for and taken into consideration. At MPWM we utilize that history and make equity investment decisions based on company’s fundamentals, consistent dividend payout when applicable, leadership, market capital and the company’s economic value. This approach does not eliminate market risk, but once again, the odds increase substantially in the investors favor.
As an investor approaches and enters retirement, a consistent and expected income stream is what allows he or she to sleep at night. The growth strategy is now overshadowed by an income strategy. Investors still need growth at this point to keep pace with inflation, but now have the need for a more conservative income producing portfolio. The income producing assets include dividend paying blue-chip stock (large market cap companies), preferred equity shares, exchange traded notes (ETN’s) and bonds.
Of course, income needs vary from person to person as well as the risk associated with the assets.