Invest with Confidence: 5 Pillars of an Effective Portfolio

August, 2023

Investing makes it possible for many of us to achieve important lifetime goals, such as retirement. That’s why we employ an investment approach based on more than nine decades of data, analysis and research, insights from behavioral finance, and close relationships with leading academics. There are five key concepts that play a vital role in the construction and management of a prudent portfolio. Together, they add up to a distinctive, long-term, evidence-based approach.

We believe your portfolio should be designed to give you the highest probability of achieving your goals with a suitable amount of risk.

Markets are highly efficient

Billions of dollars are traded daily where buyers and sellers come together and agree on a price. Given so much competition, the current price likely reflects both the latest news and the latest outlook for the investment and the economy. A prudent approach presumes the investment’s price is the best estimate of the current value and doesn’t try to outsmart the market.

Risk and expected return are related

If you want the potential for more return, you’ll need to accept more risk and likely greater fluctuations in value. Sometimes these risks pay off with more return, but sometimes they result in losses. Although adding more unique sources of risk and return can potentially create a portfolio with steadier growth, you shouldn’t take more risk than you’re comfortable with.

Diversification is essential

Diversification has been called the only free lunch in investing. This is because using a single stock, strategy or investment type is riskier than mixing different types of investments. Holding multiple investments reduces the risk that any single investment will cause a drag on portfolio performance.

Pursue factors of returns

 Research has shown that allocating more of your portfolio to companies that share certain characteristics can increase your potential for return. Consider building portfolios with focused exposure to key “factors” of returns, such as company size, relative price, profitability, and momentum. This exposure largely determines a portfolio’s risk and return. Although these investments typically bring more risk, prudent portfolios are built to most efficiently allocate across multiple sources of risk—even if it means performing differently from headline indexes.

Focus on what you can control

A good start to the investment journey may involve establishing an Investment Policy Statement that will guide how to respond to different market environments. Because, as history shows us, market declines are not uncommon. Despite the frequency of market hiccups, a long-term perspective highlights the potential benefit of staying invested. Plan for market declines, because on average:

  • One in every three months, stock markets lose value.
  • Stock markets will decline by 10% or more once every two years.
  • Stock markets will decline by 20% or more once every four years.

A long-term perspective is one of the most important ingredients of portfolio success. But the powerful emotions we experience when markets move up and down can get in our way. Resist trying to predict interest rates, the impact of government actions or outsmart the market. Instead, focus on the areas that can be controlled—such as setting a thoughtful investment strategy, rebalance your portfolio periodically to keep it aligned with your goals, and follow a disciplined review process.


As an independent Fiduciary advisor, we act as a valued partner who can help tie your investment plan to what matters most to you personally and financially. We work closely together to help you stay focused on the long term and achieving your goals. In addition, we closely monitor your plan, update you regularly on your progress, and make any changes necessary to keep pace with where you are in life. We are dedicated to consistently delivering a better experience for our clients and believe strongly that our approach can make a real difference.



Source: Ken French Data Library. Past performance is no guarantee of future results. Stocks are represented by the Fama/French Total US Market Research Index Portfolio, which is an unmanaged index of stocks of all U.S. companies operating on the NYSE, AMEX, or NASDAQ. Over the 96-year period from January 1927 through December 2022, U.S. stocks had an intra-year decline of 10% or more 65 times (roughly once every 1.5 years), and they had an intra-year decline of 20% or more 25 times, which is roughly once every 3.8 years. U.S. stocks were down 429 of the 1,152 months in that time frame, or slightly more than once every 3 months.

Disclosures: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party data which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.