At CWM, we believe that every portfolio should be designed with three criteria in mind:
1) Is the goal of the portfolio to be growth, income or both growth & income?
2) What is the investment time horizon for a particular portfolio?
3) How much risk, or volatility, is the client willing to accept in the portfolio?
The foundation of every individual portfolio will be built utilizing the specific answers each client has to these three questions. Once we have a stronghold on the goal, timeframe and risk parameters of the portfolio, we can then begin to move into the development of the diversification and investment selection strategy.
Our investment philosophy is as follows: Every portfolio should be comprised of the appropriate mix of cash, fixed-income securities, and high quality, individual common stocks, ETF's or mutual funds invest in common stocks.
To begin we will recommend setting aside an emergency cash reserve fund for any liquidity needs that may be required over the next 6 to 12 months. A money market fund or another cash equivalent would be appropriate to fund this reserve.
Next, we recommend purchasing the appropriate amount of fixed income securities to either cover your income needs over the next 7-10 years or to provide a safe anchor to a growth portfolio. Based on your unique needs and input we will develop a fixed income strategy designed to cover your specific situation. We will utilize U.S. Treasury securities, corporate bonds, preferred stocks, REIT's, high dividend stocks or tax-free municipal bonds to fund this portion of the portfolio.
To complete your portfolio, we recommend purchasing high-quality, individual common stocks, ETF's or mutual funds that invest in common stocks with any principal not needed as outlined previously. We recommend only common stocks that meet our strict financial criteria, or ETF's and/or mutual funds that meet certain guidelines to fund this part of the portfolio.
By following this strategy, your portfolio will be specifically geared toward your needs. This is a more effective method of investment allocation than just plugging your age into a standard allocation formula. We understand that each client has unique situations and needs, and we incorporate that into the development of each individual portfolio.