Our Investment Proven Process
“It isn’t what you do, but how you do it.” -John Wooden
Our Investment Proven Process is how we approach investing for all clients. It is not a one size fits all approach, and it is not selling you a product to try to fix an issue.
Our process involved trying to understand each client’s specific story and providing them with a solution for their investing need. Each client is unique, so that is why we treat each case individually and provide a custom investment solution that best fits your need and financial goal.
1. Risk Tolerance
Every investor has a unique set of circumstances, experiences, and DNA that require an individualized approach to portfolio construction. There are two overarching themes in risk tolerance: ability and willingness.
Ability is purely academic and deals with your ability to assume risk. We consider: your income, your time horizon for the funds invested, liquidity constraints, the size of your portfolio and other assets, debt as well as your goals and objectives for the money.
Willingness is purely behavioral. Here we consider your pain threshold for loss and the likelihood you might deviate from your investment plan when trouble occurs. Personality types, past experiences, and inherited or developed biases are all part of what makes investors unique. it is our job to understand what makes you tick and help guide your expectations and actions as you move toward your goals.
2. Asset Allocation
Investing is hard, picking good individual stocks is harder, and doing so consistently is even harder. Our edge is not from this perspective. This is why we utilize both top active investment managers and passive index funds to gain market exposure.
Where do we add value? Understanding the bigger picture from a 30,000-foot view. Getting our clients exposure to stocks, bonds, and real assets as cost-effectively as possible. We use mutual funds and ETFs in the appropriate asset classes to ensure that our clients have an asset allocation that is in line with their goals and their risk tolerance.
3. Tax Efficient
Perhaps as important as the construction of your portfolio is where and how you locate those assets between your various accounts. Ideally, you want your most tax-efficient assets in your taxable accounts, and your less tax-efficient assets in either tax-deferred or tax-free investment accounts like a traditional IRA, 401(k), or Roth IRA.
In non-retirement accounts, there are tax considerations to most transactions and income produced. While we look to mitigate losses, we will harvest losses within a portfolio to offset gains, portions of ordinary income, or carry forward into future years to control the tax liability as much as possible. Tax losses are always considered in the portfolio rebalancing process.
We make informed decisions on when to book capital gains, how to avoid common IRS pitfalls, and ultimately how to make sure your clients keep as much of their returns as possible.
4. Global Diversification
We are wired to favor what is familiar and comfortable, and there is no better example than the home country bias reflected in many investors’ portfolios. Roughly 53% of the world’s publicly traded companies are domiciled in the United States, yet many investors have close to 100% of their equity exposure in the U.S. It’s what they know.
We seek to conquer these diversification challenges via our global perspective. Our starting point for our client’s stock exposure is the entire world and all available opportunities.
5. Seek Value
It is tempting to chase “hot” investments that have done well. However, we know over long market cycles, investors are rewarded for seeking value and not overpaying for the investment of the day.
Favoring sectors, geographies, and markets that trade at discounts to their long-term fundamental value is not always a popular approach, but clients rely on us to commit their capital in a fashion that is aligned with their long-term goals and in line with their risk tolerance.
Value can suffer periods of underperformance as witnessed over multiple market cycles. Patient investors who stick to their long-term strategy are generally rewarded for this discipline over time.
6. Reduce Friction
Much of what happens in markets and economies is outside of investors’ control. We refer to a lot of what we can control as frictions. Examples of frictions are trading costs, commissions, bid/ask spreads, unfair trading practices, cash drag, short-term redemptions, high turnover, and excessive internal fund expenses.
We aim to control these items diligently by building our workflows, trading tools, and business model to prevent them from unnecessarily happening in the first place.
7. Behavioral Alpha
Rather than focusing on beating the market, we focus on improving the outcomes our clients would achieve on their own and most importantly, on helping build portfolios aligned with our clients’ goals.
Our job is to make sense of the infinite investment options available and keep clients away from long-term damage to their capital and goals. If we provide the roadmap by starting with an appropriate risk exposure, tax efficiency, and educate them on against going harm in the toughest of times, we’ve succeeded.
Warren Street Wealth Advisors, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.