The Cornerstone

February 2014

“The Best Investment Approach”

 It has become more common for advisors and research analysts to speak about Thematic, Thesis or even Opportunistic approaches to investing – the secret sauces that keep your portfolios humming.  Are these just more made up ideas or marketing gimmicks to keep the public on their toes or is there some real information here that can help in portfolio management? I think most know my approach – using as much information as possible without being locked into any one approach – leaving you open to new ideas and change. So let’s examine these: Thematic – Changing landscapes, demographic, societal, technological or even political developments that create opportunities.  These are opportunities that may take several years to come to fruition so you have to commit yourself and that part of your portfolio in advance to get ahead of the curve. It becomes a story and one that we love to retell over and over. It becomes part of the longer term focus, making it easier to hold non-performing assets for longer than we normally would.  When it works, the rewards can be well worth the wait and sometimes the idea is right but sadly no rewards.  For example, solar energy – great idea, but the underlying economics still haven’t risen to our expectations.  Keep in mind that concentrating in specific industries or sectors may subject a portfolio to higher risks and volatility than portfolios invested more broadly. Thesis – This may be considered as the next step after the Thematic approach. It involves considering themes that have been in play for many years and what will happen in the future because of those Themes. Many investors have built upon these themes – think computers, tires or fuel (Cars! How simple!) or foreign investing and can run them for many years.  On the other hand, some just fall apart like in 2001 when the Dot-Com bubble burst. Opportunistic – You probably hear me talking about this the most, with my trading background and being the “shark in the fish tank”. I’ll admit I have an affinity to this because it allows me the greatest possible returns from any opportunity at any time – and I probably don’t have to wait too long to see progress. I believe it represents the truly independent approach to directing capital to seek the highest potential, risk-adjusted returns available – at that time. Cash or short-term fixed income is used as a defensive strategy – keeping the powder dry – while waiting to strike. Think about Warren Buffet or Sir John Templeton – 2 great investors who believe in buying when others are wildly selling. None of these will work all the time – so it’s important to have a strategic portfolio that is looking forward to new trends – some that may be still going long after we’re gone.  In addition, we need to be able to sit on the sidelines patiently until new opportunities are available, then grasping them when it’s right. In every case, it’s important that your time frame, assets and risk parameters are working together to give you a portfolio that’s truly functional. Thank You Very Much for your Business! Phil The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  * Stock  investing involves risk including loss of principal.