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500 Capitol Mall, Suite 2350

Sacramento, CA 95814
1.916.405.9140 | Email Us

Investment Strategy

“Stocks always go down faster than they go up, but they always go up more than they go down.” – David Gardner

At Towerpoint Wealth, we do not believe market timing and beating the market works over the long haul. We are humble about our ability to accurately predict the future, and do not speculate. We do not have a binary “all in” or “all out” philosophy. We do not believe that there is ever a time to fully and completely get either in or out of the stock market. Recognizing that investment decisions do need to be made in part based on future expectations, we also recognize that our veritable crystal ball is never completely transparent.

The centerpiece of our investment strategy focuses on developing a foundational strategic asset allocation and properly constructing a portfolio specifically tailored to your unique needs and goals. We will take you through different investment scenarios with different risk settings to assist and guide you in making sound investment decisions. Most of our investment/portfolio-specific recommendations are centered on low-cost index and low-cost institutional mutual funds, individual investment-grade bonds, and various exchange-traded funds, or ETFs. While sensitive to its movements, we will not rashly react to the daily, weekly, and monthly gyrations of the stock market, and instead accept that these gyrations can and will occur.

We will be disciplined in working alongside you in helping you maintain focus on your unique and customized plan and strategy, channeling our energy towards what we can control (risk, taxes, expenses), and not what we cannot (politics, markets, economic changes).

Strategic asset allocation

The foundation of our investment strategy is the development and implementation of a strategic asset allocation based on your unique set of financial circumstances and risk tolerance. We determine this strategic asset allocation after determining the appropriate level of risk necessary to obtain the growth needed to achieve your goals and financial independence. This is the scientific portion of our investment-specific strategy.

Disciplined portfolio rebalancing

In conjunction with this strategic asset allocation policy, we believe the single most important and effective tool for investment success over time, after setting and implementing this strategic asset allocation, is rebalancing.

 

On a semi-annual basis (or more often if deemed necessary), the portfolio shall be rebalanced to bring the overall investment portfolio diversification back within recommended strategic asset allocation guidelines. Employing a “sell high, buy low” strategy, we add to areas of the portfolio that are undervalued, and reduce areas that are overvalued. Tax efficiency is a central consideration when deciding in which accounts the rebalancing should occur.

 

The rebalancing strategy is not meant to be overly constrictive or regimented, and is meant simply as a general guideline. Each investment and situation shall be evaluated on a case-by-case basis before rebalancing occurs.

Tactical rebalancing

While the importance of having this strategic asset allocation cannot be overstated—as it forms the backbone of our investment strategy—it is by no means the end-all to investment success. Towerpoint Wealth believes it is myopic to simply set this strategic asset allocation and not have the flexibility to adjust it based on current, or more importantly, assumed future economic and market conditions. This part of our investment strategy is known as tactical asset allocation, where decisions are made on an as-needed, as-appropriate basis. These tactical decisions are driven by our research and belief(s) regarding which market sectors/asset classes may be undervalued and poised for a recovery, and which may be overvalued and poised to retract, and can be viewed as an “artistic” overlay to our “scientific” backbone strategic asset allocation and rebalancing strategy.

 

These decisions can sometimes seem counterintuitive to clients (why would we want to reduce what has done well and add to what has done poorly?) but we believe the intermediate and longer-term benefits to strategic and tactical rebalancing are both documented and attainable. However, both confidence and discipline are required. As Warren Buffett said: “Be fearful when others are greedy and greedy when others are fearful.”

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