As a financial advisor and investment consultant, I use the following fundamental principles when designing an investment portfolio:

•    The purpose of a client's investment portfolio is to fund current and/or future financial goals.

•    The design of the portfolio must take into account your financial goals and objectives, time horizon, risk profile, liquidity needs, current income needs, estate planning, taxes and other unique situations.

•    The appropriate allocation of investment assets for your goals and risk tolerance is the most important component in developing an investment portfolio. Investments should be allocated among different asset classes to safely maximize returns and lessen risk.

•    I believe that a diversified, well-balanced portfolio, combined with affordability and patience, increases the likelihood that you will achieve your long-term financial objectives.

I recommend portfolios that are a blend of strategic and tactical allocations containing both passive and active management investments. The strategic allocation is constructed first. This is designed to be a lower risk, well diversified base that will meet the overall market returns. Once you have established a firm foundation, you can use tactical investments that add higher risk adjusted returns to your overall portfolio by reducing portfolio volatility. Tactical investments are also used to take advantage of long term trends, which show promise of higher gains than the overall market. More focused tactical investments often require active management because less efficient markets and specific knowledge can result in higher quality results.

We pay particular attention to current economic factors and their influence on portfolio risk. One tool we use is MacroRisk Analytics to evaluate investments and lower portfolio risk.  More detail is here.

Using a combination of passive and active management keeps your risk adjusted returns matched to your goals, risk profile and time horizon. It also results in a lower transaction costs, custodian fees, and taxes.

The important thing to remember is that no one can predict the future. I do not suggest that I, or any of the money or mutual fund managers that I may recommend, will make the correct decision every time. I do believe that studying the historic trends, relationships of investment classes, and the philosophies and approaches of successful investment managers can provide valuable insight.