Our investment process:

It begins with understanding your individual goals, risk tolerance, and time horizon. We implement a diversified portfolio using propriety research to optimize risk and reward. We believe that it is very difficult for most investors to outperform general stock market indexes. Therefore our investment committee carefully vets a variety of investments including ETFs, Mututal Funds, Stocks, Closed-End Mutual Funds, and more. While we think broadly diversified index funds or ETFs are an excellent tool (in fact we use them frequently) there are many instances of active managers such as Warren Buffett, David Tepper, Will Danoff, Peter Lynch, and Carl Icahn who have had impressive performance records relative to the general stock market.

Tactical Value approach:

We seek superior return characteristics relative to the Dow Jones Moderate Index (Roughly 60% stock, and 40% bond allocation) Rather than applying a blanket approach of buying and holding only broadly indexed ETFs, or only relying on active investments, we use a more opportunistic approach. We consider a broad universe of investments and apply active management, only when we believe that we have a high probability of achieving superior risk adjusted returns. While we seek long-term outperformance, we cannot guarantee outperformance in every holding period. There are certainly times when assets that appeared to be undervalued stay that way for a considerable amount of time. For instance Warren Buffett’s Berkshire Hathaway underperformed the S&P 500 in 4 out of the last five years ending 2014. This is despite his stellar long-term record.

Tactical Value also involves holding less of an investment when the expected returns are less favorable, and more of it when we expect returns to be more favorable. For example, when ten year US government bonds once yielded 10%, they were clearly more attractive than when they more recently yielded 3%. Our approach would be to hold more of this asset during the former period and less during the latter, whereas many broad asset allocation approaches tend to ignore this. Furthermore, we pay close attention to factors that lead to outperformance, and we apply those principles to portfolios.

Some of the most well researched factors that have lead to consistent outperformance are as follows:

• The size factor; smaller companies tend to outperform larger ones over long periods of time

• The profitability factor; companies that earn higher returns on equity tend to outperform companies with lower returns on equity over the long run

• The value factor; less expensive stocks tend to outperform richly valued stocks over the long term.

There are a variety of other factors ranging from things like dividends, growth, and liquidity that we consider in our approach.

We consider the valuation of assets in our analysis. There is an old saying that the money that you make on Real Estate (RE) is based on the price that you paid for it. Similar to the RE market, financial assets are subject to fluctuating prices. In an interview with Tesla CEO Elon Musk (at their annual stockholder meeting on 6/3/14), he called the stock market “manic depressive.” Our approach would be to buy more of assets that we love when their prices are overly depressed (and the prices are low). Warren Buffett applies a simple concept to investing, “be fearful when others are greedy. Be greedy when others are fearful.” We apply that simple concept to portfolio management.