In everything we do, our level of success is often a direct result of the time, energy and effort we put into the endeavor. At SevenWealth, we view investing as the fuel that turns the best laid plans into reality. Because time, energy, and effort are limited resources, you have to be extremely selective in the endeavors you choose. As part of our wealth management process, we partner with Loring Ward and Dimensional Fund Advisors in an attempt to bring our clients an effective investment portfolio solution. We believe in a prudent, strategic approach to portfolio management grounded in financial science, data, academic research, and real-world results.

Five Steps to an Effective Portfolio¹


I. Markets Work and Emotions Are Real

Instead of trying to beat the market, we believe that you should let the market work for you. A 1965 study by University of Chicago economics professor Eugene F. Fama, who developed the efficient-market hypothesis², determined that it's nearly impossible to consistently "beat" the markets using stock selection or market timing. As a result of this research, we believe our clients are better served by focusing on capturing the capital markets' long-term rates of return. Over the past eight decades, equities have significantly outpaced inflation and fixed income in terms of long-term growth.

II. Risk and Return Are Related

Markets can be chaotic, but over time they have shown a strong relationship between risk and reward. This means that the compensation for taking on increased levels of risk is the potential to earn greater returns. According to noted academic research by professors Fama and Ken French,³ there are three factors or sources of potentially higher returns with corresponding risks: 1) invest in stocks, 2) emphasize small companies, and 3) emphasize value companies. Our portfolios overweight small and value company stocks in an effort to capture their higher expected returns.

III. Diversify with Structure

When it comes to investing, risk cannot be eliminated, but it can potentially be reduced or mitigated through a prudent, structured approach:

  1. Combine multiple asset classes that have historically experienced dissimilar return patterns across various financial and economic environments
  2. Diversify globally. More than half of the global stock market value is non-U.S. and international stock markets as a whole have historically experienced dissimilar return patterns to the U.S.
  3. Invest in thousands of securities to help limit portfolio losses by reducing company-specific risk. 
  4. Invest in high-quality, short-term fixed income to help lower historical correlations with stocks and decrease default risk.

IV. Customize Your Portfolio

Traditionally, many portfolios have been built using average historical returns and volatility of returns. We take portfolio modeling to the next level by analyzing what really matters to you—downside risk (the likelihood that an investment will decline in value) and the degree to which you are focused on asset protection versus asset growth. While our portfolios vary in terms of composition and asset class weighting, they all are designed and managed to help keep costs low, minimize taxes, and control risks. The end result: a portfolio focused on trying to deliver expected rates of return for your chosen level of risk.

V.  Invest for the Long Term

We believe a long-term perspective is one of the most important ingredients for portfolio success. We believe in staying patiently invested and avoiding the temptation to try to time the ebb and flow of the market. We will rebalance your portfolio periodically to keep it aligned with your goals, and we will work with you to help keep you on track toward achieving your investment goals. We will help you manage the emotions of investing and help you avoid making hasty, ill-considered decisions. As an Accredited Investment Fiduciary®, we will provide you with an elevated duty of care, prudence, and diligence by putting your best interest first.

¹"Five Steps to an Effective Portfolio," LWI Financial ("Loring Ward")

²"The Behavior of Stock-Market Prices," Eugene F. Fama, Journal of Business, Volume 38, Issue 1: 34-105, January 1965.

³"Cross Section of Expected Stock Returns," Eugene F. Fama and Kenneth R. French, Journal of Finance, Volume 47, June 1992.

Diversification does not assure a profit or protect against loss in declining markets. No program can guarantee that any objective will be achieved. Investing involves risk including possible loss of principal.  Past performance is no guarantee of  future results.