HOW WE BUILD YOUR PORTFOLIO
Our Accountable Portfolios are designed to offer an optimized mix of stocks, bonds, and short term investments based on varying levels of risk. We begin with a belief that markets are efficient and that traditional active management doesn't perform any better than random chance would suggest.
Because no two investors are alike, ATX Portfolio Advisors™ offers clients a range of Accountable Portfolios designed meet the needs of your unique situation. If you fund your account with existing holdings, we will carefully weigh the tax consequences, risks, costs, and other characteristics to determine if they should be incorporated into your portfolio.
ATX Portfolio Advisors ™approach to portfolio construction is influenced by the work of Nobel Prize laureates William Sharpe and Harry Markowitz, who shaped the role of financial science in investing through their development of Modern Portfolio Theory. This theory states that a portfolio diversified across asset classes offers the best opportunity for an investor to achieve the highest possible return for a given level of risk. It suggests that your portfolio should be diversified with REITs, international equities, emerging market equities, US equities, and fixed income. Our portfolios own around 12,000 stocks in over 40 countries as well as bonds that are selected based upon each customer's unique situation.
Stocks tilted to capture better returns
We have been further influenced by the work of several noted academics, such as Nobel laureate Eugene Fama, Kenneth French, and Robert Novy-Marx. These economists have shown over decades of study that there are premiums (excess returns) from investing in stocks with prices that are lower relative to their book value , small company stocks, and companies that are relatively profitable.[i,ii]
Our Accountable Portfolios are invested in the broad markets, both in the US and internationally. Instead of just buying a capital weighted index such as the S&P 500®, our approach over-weights those areas that have shown better returns over time.
BUY AND HOLD
ATX Portfolio Advisors™ employs a “buy and hold” approach to managing portfolios. This is based on our belief that market timing doesn't work due to the randomness of returns. Rather, the focus should be how much you can risk losing while staying invested in the market.
For qualifying accounts[iii] that prefer the predictability that individual bonds can provide, we will build customized bond ladders for the fixed income portion of the portfolio, tailored to your needs and tax situation. We typically build the ladders with FDIC Insured Certificates of Deposit, US Treasury Bonds, US Government Sponsored Enterprise Bonds, or highly rated Municipal Bonds.
[i] See "Value vs. Growth: The International Evidence" at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2358 For more, see Kenneth French's website of data and working papers athttp://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html
[iii] Varies by model and fixed income type.