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Aug 22, 201604:24 PMFinancial Perspectives

with Michael Dubis, CFP

Do you have an investment philosophy?

(page 1 of 2)

Many people invest based on rhetoric, stories, or simply emotional reactions. This often leads to bad outcomes and it’s why so many people do so poorly when they invest.

You need a few things set right in your mind before you should consider investing:

  1. A solid financial plan.
  2. A sound investment strategy.
  3. There’s a third part: You also have to understand what you believe in, as well. An investment philosophy derives itself from your “beliefs” about investing. 

That said, despite what any financial advisor, book, or talking head might say there is no perfect investment philosophy. In fact, if someone says their plan is “the best,” your Spidey sense should immediately go off.

Here’s our one-page house philosophy (© Michael A. Dubis Financial Planning LLC):

Our investment approach is based on the following key tenets:

  • We begin by understanding your unique purpose, values, and goals. This drives the plan.
  • We only invest because we believe the world wants to be in a better place five-, 10-, and 20-plus years from now and are willing to get there. Your optimism is absolutely necessary for long-term investing.
  • We believe investing is an art and science. The science is based on evidence-based investing (EBI). EBI is a reasonable approach that combines the data from the past and present with sensible guidelines about the unknowable future.
  • We also can’t ignore unquantifiable behavioral influences or qualitative goals that can guide your decisions. We attempt to build a portfolio that blends this art and science to your unique situation so you will stick to it during good and bad times.
  • We do not offer “outperformance” or entertain “performance chasing” since it’s distracting, intellectually dishonest, impossible to promise, and leads to poor choices. We offer a process of structure and discipline sensibly controlling for the things we believe can be controlled for.
  • We do not believe in market timing or individual stock picking. Rather, we believe in global diversification of asset classes and strategies. Capital markets are global and EBI supports global diversification.
  • We are long-term focused. Short-term cash flow needs should be identified in advance and set aside. The portfolio can then be allowed to work through five- or 10-year market-cycles.
  • We consider tax placement of investments in an attempt to improve after-tax returns.
  • We consider costs and attempt to optimize portfolio costs.
  • We rebalance sensibly by allowing for wide bandwidths around target allocation to consider reasonable time frames, cash deposits, cash needs, taxes, market momentum, and transaction costs.
  • We are grateful to serve you and take it seriously. There is no magic or perfect plan but there are sensible plans, which can be designed for you.

Is my approach “the best”?

I don’t know. That’s the honest answer.

I simply believe in it because it is sensible, low-cost, tax considerate, and has historically been reasonable in its results. Of course, it has its own risks just like anything else — as all disclaimers say, “Past is no predictor of the future,” etc., etc. They say that for very good reason. We won’t likely know for decades who is “best,” and then from that point forward we still won’t be able to rely on the past to tell us the “next best” from there. Process should drive actions rather than past outcomes.


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About This Blog

It is an understatement to say the world has experienced a radical shift in capital markets. There are more layers of information and opinions on the direction of the world than we've seen in decades. The internet and the media do not always make it easier, but Michael Dubis' contribution through IB blogs will help you sift through the noise and give you some perspective. You can find his company online.

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