Our asset management capabilities separate us from firms that use basic asset allocation strategies. We have an experienced portfolio manager with expertise in tactical asset allocation and individual stock and bond portfolio management.
STRATEGIC ASSET ALLOCATION
This is the foundation of asset management and is crucial to goal-based financial planning. We endeavor to:
- Achieve attractive returns while managing risk and taxes.
- Be well-diversified with a careful mix of asset classes and disciplined rebalancing.
- Utilize both historical and forward-looking return and risk expectations.
TACTICAL ASSET ALLOCATION
While many firms provide only strategic asset allocation, we believe this overly simplistic approach decreases your change of meeting your investment objectives. For example, a firm that uses only strategic asset allocation may be assuming the expected return on your fixed income investments will be approximately the same as the long-term historical average. Clearly, the current interest rate environment is unlikely to provide that kind of return and investors relying purely on strategic asset allocation may experience insufficient returns to meet their needs.
This is just one current example of the need for tactical asset allocation. The actual returns and risks of each asset class often deviate from their long-term (strategic) expectations. We overweight asset classes that we believe have attractive risk/return characteristics on a forward-looking basis and tactically underweight asset classes that we believe are less attractive. We do this in a tax-efficient manner that does not expose clients to unnecessary turnover and capital gains. Please reference this chart of asset class returns over the last 20 years to see why tactical asset allocation is so important.
INVESTMENT SELECTION
We customize the investment selection part of portfolio construction to each client’s needs and preferences. This can include a passive or active approach to fund selection. We generally find that a hybrid approach works best over time. This includes an indexed approach to areas like large cap equity where few fund managers beat their benchmark net of fees. An active approach may be useful in areas like foreign equity where the increased flexibility to deviate from an index can be helpful from both a risk and return perspective.
Our individual stock portfolios focus either on large cap blend or equity income. This approach is appropriate for larger portfolios where clients want an increased level of customization. This includes the ability to manage around concentrated holdings, tighter control of capital gains, the ability to incorporate socially responsible concerns, or simply to better utilize our portfolio management expertise.
Individual bond portfolios are particularly attractive in the current interest rate environment. They offer better ability to control interest rate sensitivity in a rising interest rate environment. Credit quality may be better managed whether you want to increase or decrease average credit quality along the risk spectrum. Individual bond portfolios also eliminate the fund level fees present in fixed income mutual funds.
INVESTMENT APPROACH – (click for details)
Mutual Funds – Passive, Active, Hybrid
Individual Stocks – Large Cap Blend, Equity Income
Individual Bonds – Tax-Exempt, Taxable
Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
Resonance Financial does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.