Investment Principles and Practices

There are 3 investing principles and 4 investing practices that I subscribe to:


  1. Faith in the Future of the Markets – In 1960, when I was born, the S&P 500 was at 56.8. Since then, we’ve experienced 8 recessions, Kennedy’s assassination, the Vietnam War, race riots, the Mideast oil crisis, the economic calamity of 1974, 18% interest rates, the gold and silver crashes, soaring deficits, the Iran hostages, the S&L crisis, Tiananmen Square, the bond market crash, Y2K, September 11th, Katrina, record gas prices, the subprime mortgage crisis, the credit meltdown, Bank bailouts, Wars in Iraq and Afghanistan and the European credit crisis. The S&P 500 today sits at about 1,250. This 22-fold increase in the face of all these crises is all I need to know about the future of the markets. Source:;;
  2. Patience – I will give a long-term, goal focused portfolio strategy the time and patience it needs to come to fruition. By design, your portfolio will be appropriate to your long-term financial goals and objectives. A long-term portfolio should not react to short or intermediate term news. Patience is required to potentially achieve these goals, particularly in down markets.
  3. Discipline – In the face of media blaring about the latest end of the world, discipline is needed to continue doing the right things. Continuing to invest in a falling market, resisting the urge to jump on the hot sector, not panicking out of what is a properly crafted portfolio for your long term success, all take discipline. This is tested both in times of euphoria and times of sheer terror.


  1. Asset Allocation – According to the Brinson Study, 93% of portfolio returns come from Asset Allocation. Essentially, this is the battle between equities and bonds. Per Ibbotson, historically from 1926-2010, after inflation, real long term equity returns are 35 times that of long-term Gov’t bonds. My preference leans towards equities. Past performance does not guarantee future results.
  2. Diversification – Diversification is the make up of different securities within the equity and bond classes. My standard diversification will comprise of Large Cap Growth, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, Emerging International, Developed International, Real Estate and, in some portfolios, Balanced and Bonds.
  3. Rebalancing – Each year around the end of April, I will rebalance most portfolios back to their original percents, depending on individual circumstances. Essentially, rebalancing sells the winners and buys the losers within your portfolio. Said another way, rebalancing buys low and sells high.
  4. Risk/Downside Management – For risk, or downside, management, I subscribe to the work of Dorsey Wright, a Richmond based Research Company. The achievement of a ‘double bottom’ of three long term trend charts comprise the singular moment when I will consider temporarily violating the above principles and practices, for the purpose of attempting to mitigate the effects of, not eliminate, a prolonged market downturn.

The above Principles and Practices apply in most cases, but not all. Depending on individual circumstances, other strategies may prove to be better suited to a particular client.