Our Approach to Investment Management

Investment management is an important part of our comprehensive wealth management services.

Prospective clients often ask questions like, “Can you beat the index over 10 years?” They may mean a stock market index like the S&P 500 — also called a “market capitalization index”.

Investing this way is called momentum investing. Funds that follow an index tend to buy what is already in favor and sell what has already gone down in value — so they end up buying higher and selling lower.

For example, as a company gets more popular and expensive, an S&P index fund will buy more of it even though it’s becoming overvalued. If another company is struggling temporarily and losing value, the fund will sell shares of that stock even though the fundamentals of the company remain strong.

Contrarian investing

You might want to do the opposite. This is called being a contrarian investor, and it is what we generally practice. In the example above, we would sell the strong company’s stock at a profit and buy the struggling company, looking for a gain when the company rebounds.

one arrow pointing opposite from the restMomentum investing performs well in a bull market — when the stock market is on the rise. A market cap index fund will often outperform a diversified portfolio in a bull market. In a bear market, when the market is down for a sustained period, a diversified portfolio might outperform an index fund.

In addition to being contrarian when it comes to which stocks to buy and sell, we are also contrarian in our timing. We invest more when the market is down.

During the COVID-19 pandemic, we bought stocks (as suitable for our clients) at four pre-determined valuation trigger points — for example, when the S&P 500 total value hits 3600. Our purchases are based on data — valuations and what is on sale — not on emotion like a sell-off in panic when the market is down. During the 2022 inflation-induced bear market, we have also identified several buying points and are regularly implementing them (as suitable for our clients).

Basing decisions on data

Even though there are many ways to value a company, it is easier to see when something is undervalued or overvalued than it is to speculate on where it will go in the future. The current valuation is a firmer piece of data.

It is possible that our portfolios could perform worse than the index fund in years we are purchasing undervalued stocks because the index fund stock allocation reduces as the market falls, while we are buying more stock as the market falls. But our clients are also likely to come out better in the years that follow as the market rebounds and those positions we bought at lower values provide gains.

A well-managed portfolio is generally going to diverge from the results of a market cap index because strategies are employed that help you buy lower and sell higher.*

Customized portfolios

Almost every client at Laurel Wealth Planning has a customized portfolio. With our 20:1 client-to-staff ratio, we know our clients well, which helps enhance their results.

There are three keys to building a portfolio that matches a client’s needs and preferences:

Tax planning

Most clients have positions in their portfolio for tax reduction reasons. They are comfortable holding that position as long as the tax benefit is likely to be more than the compromise on investment performance.

We plan what to sell and when based on our clients’ capital gains strategy.

We create charitable giving strategies that have tax advantages.

Client preference

A client may have an affection for a company they used to work at or a company whose values they believe in.

They may accept a lower return or more volatility to a certain point on these investments compared with others they hold purely for performance.

ESG investing

Clients who prefer our ESG investing option may want to emphasize environmental sustainability or gender equality.

These portfolios might invest in different industries than a standard portfolio. This can lead to either better or worse results than a standard portfolio or an index depending on performance of those industries.

Building a portfolio

When do-it-yourself investors build a portfolio, they usually start by picking an investment tool – like a stock or bond or mutual fund. This is the last step in our process.

inverted pyramid showing steps of building a portfolioOur first step is understanding a client’s goals for their money, their preferred risk level, their tax situation, and any preferences as explained above.

We then set a tax strategy and a risk-reward strategy (i.e., the targeted return vs. preferred volatility). After that comes an asset allocation and diversification plan within those strategies.

Then we factor in global market trends to get specific about the type of investments or industries we might want to hold.

With that framework built, we choose the best investment tools that fit within it. This might include open-end, closed-end, or exchange traded funds or individual bonds or stocks as preferred by the client.

Context and communication

Clients can see their results in real time in our online portal, and they can compare their results to various indexes. More importantly, they can call us at any time to discuss any differences in performance, so they understand the strategies behind it and how it fits into their bigger financial picture. 


*Investing involves risks, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.

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