One of the most common adages in investing is to "buy low and sell high." This principle encourages investors to purchase assets when their prices are relatively low and to sell them once their values appreciate, with the goal of maximizing returns. This strategy raises an important question: When is the market “high” and when is it “low”? The straightforward answer is: no one knows.
At Benari Capital, we don’t try to time the market. We don’t have a crystal ball that predicts the future. With that said, what describes us best is that we make informed decisions, grounded in qualitative and quantitative research conducted by our own team.
Here are a few principles that we use when designing a client’s portfolio:
- Not just buying a well-diversified fund or group of funds, but considering other forms of diversification, including geography, sectors, philosophy (e.g. multiple fund managers), and investment styles or strategies. In larger or more income-oriented portfolios, a non-traded, or alternative, investment often makes sense, although these entail an additional layer of risks, and as such should be reviewed with an advisor on a case-by-case basis. The key is in identifying a series of securities that balance each other over the economic cycle.
- We put great time and effort into aligning each portfolio with each client’s risk tolerance, time horizon (how long until they will need to draw on the account), financial goals, and values. At Benari Capital, we do not take a “one size fits all” approach. We curate each portfolio based on our clients’ needs. What that means in practice is that we have experience with a wide array of investments and use that experience to create portfolios that align with each client. We have designed a series of model portfolios that serve as the foundation of our work, and we build from there. We regularly review our security selections across client portfolios to ensure they remain in our clients' best interest, as part of our fiduciary duty. Full details of our fiduciary obligations, compensation arrangements, and any material conflicts of interest are disclosed in our Form ADV Part 2A, available upon request (see Disclaimer below this article for link).
- Tempering emotions. Psychology plays a large role in how many investors make decisions about their portfolios. However, emotions should play a limited role when building and maintaining a portfolio. It is crucial to follow through with a plan that has sound decision-making. We encourage our clients to review their portfolios periodically, but not to look at them daily. A period of weeks or months with higher volatility or even a down market do not tell the entire story of a portfolio’s success. Pulling out of the market to avoid a “loss” can often have a great cost to it. For example, although a portfolio experiences a reduction in value, there still may be capital gains, which can cause a taxable event. As well, as mentioned above, it is nearly impossible to time the market, and as such, there may be an additional loss at buying back in to the market when it begins to recover.
Even more, there is a psychological cost to “over-monitoring”, as we are naturally wired to celebrate success and have varied levels of stress or even anxiety around losses, however temporary they may be. Our added value comes in the form of ongoing monitoring and rebalancing of our clients’ accounts (keeping them in line with each client’s Investment Policy Statement), and when our clients have questions about their plan or portfolio, we address them promptly.
In conclusion, we are not shooting for the stars; rather, we are helping our clients build their financial future on firm ground, guided by principles that have been documented in finance literature.
DISCLAIMER: Benari Capital is a registered investment adviser. Registration with the SEC or a state securities authority does not imply a certain level of skill or training. This article is provided for informational and educational purposes only and does not constitute investment advice or a solicitation to buy or sell any security. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. For a full description of our services, fees, and conflicts of interest, please refer to our Form ADV Part 2A, available upon request, or here.