Investment Philosophy

Fundamental Principles

  • There are many routes to investment success: ours is not the only one, but we offer prudence, objectivity, and individual design.
  • It is important that each client have at least a basic understanding of his or her investment strategy and the individual investments.
  • Developing a sound investment recommendation requires a blend of science and art (good judgment). It is not a process of using a simple formula or a mechanical procedure.

Uncertainty

  • Typically investment professionals are not very good at predicting economic growth, the direction of interest rates, or corporate earnings in the short term.
  • Markets always surprise us. It is important to invest for probabilities, but consider the possibilities.
  • Current asset valuations matter and may lead to overweighting or underweighting a particular asset class.
  • Discipline and patience are key factors in successful long term investing.

Security Selection

  • Some investors do well selecting individual stocks. At Jones Financial we prefer the diversification available through mutual funds and exchange traded funds.
  • Security selection is important. It is an advantage for you to pay lower fees, hire strong experienced managers, invest with client focused fund companies, understand investment strategies and risks, and avoid high security turnover in taxable accounts. However, it is a mistake to focus on security selection first or as the primary investment decision. First, you need to carefully outline objectives and consider your individual risk tolerances. Next, a prudent plan of asset diversification should be developed. Then, appropriate securities can be selected.
  • Experts argue whether to use passive index funds or actively managed funds. Either may do the job for you, but often a combination has advantages.

Diversification

  • Social security, pension benefits, and annuities may not be thought of as assets in the same way as a portfolio of stocks and bonds. However, these need to be considered carefully when investing a retirement portfolio.
  • Broad diversification is beneficial long term, but may not fully protect an investor in a short term downturn.
  • "Asset location" and harvesting losses and gains can make your portfolio more tax efficient.

 


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