“The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.” – Benjamin Graham
Our approach to designing and managing investment strategies is grounded in fundamental assumptions with regard to the dynamics that most influence investment outcomes; those factors include:
A landmark investing study by Brinson, Hood, and Beebower, titled “Determinants of Portfolio Performance,” published in the July-August 1986 edition of Financial Analysts Journal, determined that approximately 94% of the disparity of returns among institutional portfolios could be attributed to asset allocation decisions, while only 4% was attributable to individual security selection, and merely 2% due to market timing decisions. As disciplined investors, we execute portfolio strategies based upon grounded, fact based research with a focus on wealth preservation.
Many influences may be out of an investors control such as short-term market events, economic climates and even headline news influences. We can, however, apply control over how we manage portfolios by utilizing efficient asset allocation strategies, designed specifically for each client family, and working to avoid irrational short-term influences and speculation.
When we develop your personal Investment Policy, it may include the following asset classes: domestic large and small company stocks, international large and small company stocks, emerging market company stocks, domestic and international company bonds, municipal bonds, money markets, real estate, and alternative investments, among others.
Investment Policy Statements
An Investment Policy Statement is a document drafted between a portfolio manager and a client that outlines general rules for the manager. This document provides investment goals and objectives while outlining the strategies, techniques and asset classes to be utilized in managing the portfolio. Specifically, the document will also include client risk tolerance and liquidity parameters.
Particularly important for corporate executives, an Investment Policy Statement will outline client customization targets such as sector biases, ideology preferences (i.e. religious, social, etc.) and specific stock restrictions. By restricting investment in employer stock, and often correlated competitors, we are able to steer clear of increased exposure to employer stock risk while also ensuring to avoid insider and Rule 144 trading concerns.
Concentrated Stock Management (Equity Compensation)
Concentrated positions can be both wonderful wealth creators and vicious wealth destroyers. The truth is that often times the difference between the two can be fast changing and difficult to predict. Large holdings of employer stock are a common complexity for today’s successful executive and an area that requires a great deal of attention, expertise and planning.
Today’s equity compensation landscape can be daunting. Multiple benefit types such as Non- Qualified Stock Options (NQO), Incentive Stock Options (ISO), Restricted Stock (RSU/RSA) or Performance Shares (PSU) each have their own features, benefits, risks and tax scenarios.
At Spurstone, we advise clients in structuring executive benefit packages and integrating these plans into the overall investment plan. We seek to manage equity compensation holdings in order to create the ideal tax, risk and growth scenarios based on that executive’s unique goals. Controlling these holdings within common holding requirements or insider restrictions is also of critical importance.
Known as a silent wealth killer, taxes have a substantial impact to the long-term, multi- generational, wealth of successful families. It is prudent to mitigate this constant risk in portfolios through a proactive and ongoing process.
Spurstone clients enjoy innovative tax hedging techniques and technologies designed to mitigate tax exposure and preserve wealth. By taking a holistic wealth view, integrating multiple client advisor sources such as the Accountant, and managing tax exposure at a global level, we seek to reduce tax exposure on a proactive basis.
Asset allocation does not ensure a profit or protect against a loss. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.