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Our core principles provide the framework to assist our clients in meeting their financial goals. At Kistler-Tiffany Advisors, our philosophy for developing customized client investment portfolios is guided by three core principles:
Asset allocation is a dominant factor in determining total portfolio return and controlling risk. Studies have shown that 93.6% of a portfolio's performance is due to its strategic asset allocation. Investment styles (i.e. Growth vs Value) move in and out of favor as the economy evolves through business cycles. Correctly predicting an economic cycle over time is a difficult task for even the most seasoned economists and investment managers. By using a style-neutral strategic asset allocation, we balance our portfolios across various asset classes and styles instead of trying to anticipate the course of the economic cycle. To further control risk, we systematically rebalance portfolios back to our clients' strategic allocations as performance moves these portfolios outside of the original allocations. Thus, we aim to reduce overall portfolio volatility in an effort to earn more consistent returns over time.
Our portfolios are constructed with a low-cost, passively invested core that provides broad market exposure. The core is complemented by actively-managed satellite positions, which have the goal of outperforming the market. Since passive index funds are certain to trail their benchmarks by the cost of the fund, we believe there is still evidence to support the role of active management in client portfolios.
We value the following characteristics when selecting the assets for our core allocations:
Core - Exhanged-Traded Funds (ETFs)
We value the following characteristics when selecting the assets for our satellite allocations:
Satellite - Active mutual funds, sector ETFs, and individual stocks
The satellite positions are included to compliment the core. These positions are intended to improve value by outperforming their respective benchmarks. Over time the satellite positions are expected to increase risk-adjusted portfolio performance.
Costs play an important role in our investment choices. We believe low costs will give our clients' portfolios a greater chance for improved investment returns. Research suggests that lower-cost investments have consistently outperformed higher cost alternatives. We do not want fund expenses to act as a drag on returns since higher costs can significantly depress portfolio growth over long periods. This is why we focus on building cost-efficient portfolios. In the end, we believe our emphasis on managing cost will help achieve investment success.
We focus on:
 Larrabee, D. (2012, February 16). Setting the Record Straight on Asset Allocation. Retrieved June 06, 2016, from https://blogs.cfainstitute.org/investor/2012/02/16/setting-the-record-straight-on-asset-allocation/
Rekenthaler, J. (2014, August 25). Active Versus Passive Is the Wrong Question. Retrieved June 06, 2016, from http://www.morningstar.com/advisor/t/96006915/active-versus-passive-is-the-wrong-question.htm
"Fund Expenses---A Very Slippery Slope" by William Bernstein, 1999. http://www.efficientfrontier.com/ef/799/expenses.htm
Kinnel, R. (2016, May 05). Fund Fees Predict Future Success or Failure. Retrieved June 06, 2016, from http://www.morningstar.com/advisor/t/115098857/fund-fees-predict-future-success-or-failure.htm
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