We like a core/satellite approach because it has several features in terms of portfolio design that is often ignored by rigid ‘check-the-box’ wealth management strategies. First, it has built-in modularity and by that we mean it can be easily adjusted and tweaked. For instance, suppose you wanted to increase you exposure to consumer cyclicals, financials and technology stocks. This could be easily accomplished by purchasing exchange-traded index funds for the core or satellite portion of the portfolio. Let’s suppose you wanted to reduce your exposure to energy and basic material stocks or increase your weighting to income producing instruments within in your core portfolio. By design we build the portfolio so that the exposure to any individual security, industrial sector or asset class is readily transparent and easy to modulate. The core/satellite approach enables us and provides you the flexibility to be more opportunistic or more defensive when market conditions change. A common complaint from new clients is that they have no idea where their exposure exists and their previous advisor had very little incentive or ability to manage it. The general explanation is that professional managers will make the proper adjustments to your portfolios when market conditions change. The reality is many so-called professionals are too big to be as nimble as they claim to be. Basically the investment process has been de-personalized and there is little accountability for the clients. We build clients a truly unique and transparent portfolios and then we work with them to help them understand what they own, why they own it and what the risks are. Clients deserve more than check-the-box wealth management and they deserve a personalized portfolio.
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