Investment Strategy
Investment Strategy
Foundations of Investing
Wellspring’s strategy for investing for maximizing outcomes with the greatest likelihood of success rests on four pillars:
allocation right.
informed
investor.
Invest With Your Plan In Mind
While many believe the best investments are the path to success, that is just one piece of the puzzle. It is now accepted that a comprehensive and regularly monitored financial plan is equally, if not more, important than solid investments.
Investing must be executed with a goal in mind and appropriately managing risk. To accomplish this, we will work with you to develop a financial plan to be used as a guide for managing your investments. We then seek to deliver upon your goals and objectives outlined in your financial plan by balancing investment risks and returns.
Get Your Allocation Right
A widely published and seminal study by Brinson, Beebower, & Hood (Financial Analysts Journal, May/June 1986) determined that 91% to 98% of portfolio returns are due to the institutional asset class allocations selected. Therefore, our investment strategy centers on the portfolio allocation for our clients and modification of that allocation as time and circumstances dictate. This approach results in an attractive and disciplined sell high/buy low implementation. The impact of emotional and psychological decisions is minimized and controlled so solid investment discussions may occur.
Best-Of-Breed Investments
Wellspring takes a deeply passive (but not strictly “indexed”) investment approach to portfolio structure. Our strategic partner is Dimensional Fund Advisors (DFA). They pioneered passive investing using the information embedded in market prices combined with fundamental data to identify differences in expected returns among securities systematically. DFA has continually demonstrated exceptional prowess at managing specialized funds, maximizing potential returns, and minimizing expenses.
Individuals cannot invest in the funds utilized by Wellspring on their own. They are generally restricted to large investors and corporate pension plans for companies such as AT&T and Boeing. This helps keep the funds performing well without driving up the costs in the funds with undisciplined small investors.
Our selection of DFA for our investment strategies is based on their deep understanding of the following principles after decades of research:
Passive investing wins. The high cost of administering an actively managed fund can cost you 10-30%1 of its possible return. If you have a taxable account, it’s almost impossible to win.
The last group of credible researchers who looked at this subject concluded that your chance of finding a proper outperforming fund was 160:13, and even then, they could not rule out the impact of luck on that particular choice.
Diversification is key to risk management. Our investment strategies are designed to protect against “all-your-eggs-in-one-basket” risks. The investment array we bring to the table will put you in 30 to 38 distinct institutional asset classes, instantly diversifying you across thousands of companies around the globe.
The most reliable way to increase returns is to lower costs. There are many elements involved in the cost of investing. These include trading costs, taxes, and management fees, to name a few. In some managed funds, these costs can exceed 1/3 of your returns. Consider this carefully: whether the fund goes up or down, the fund will always take 1/3 of the returns away from the investor. Dimensional Funds works very hard to minimize tax, trading intelligently, and management costs to deliver some of the lowest fees in the industry, returning more of the earnings to the investor.
Best-Of-Breed Investments
Wellspring takes a deeply passive (but not strictly “indexed”) investment approach to portfolio structure. Our strategic partner is Dimensional Fund Advisors (DFA). They pioneered passive investing using the information embedded in market prices combined with fundamental data to identify differences in expected returns among securities systematically. DFA has continually demonstrated exceptional prowess at managing specialized funds, maximizing potential returns, and minimizing expenses.
Individuals cannot invest in the funds utilized by Wellspring on their own. They are generally restricted to large investors and corporate pension plans for companies such as AT&T and Boeing. This helps keep the funds performing well without driving up the costs in the funds with undisciplined small investors.
Our selection of DFA for our investment strategies is based on their deep understanding of the following principles after decades of research:
Passive investing wins. The high cost of administering an actively managed fund can cost you 10-30%1 of its possible return. If you have a taxable account, it’s almost impossible to win.
The last group of credible researchers who looked at this subject concluded that your chance of finding a proper outperforming fund was 160:1,3, and even then, they could not rule out the impact of luck on that particular choice.
Diversification is key to risk management. Our investment strategies are designed to protect against “all-your-eggs-in-one-basket” risks. The investment array we bring to the table will put you in 30 to 38 distinct institutional asset classes, instantly diversifying you across thousands of companies around the globe.
The most reliable way to increase returns is to lower costs. There are many elements involved in the cost of investing. These include trading costs, taxes, and management fees, to name a few. In some managed funds, these costs can exceed 1/3 of your returns. Consider this carefully: whether the fund goes up or down, the fund will always take 1/3 of the returns away from the investor. Dimensional Funds works very hard to minimize tax, trading intelligently, and management costs to deliver some of the lowest fees in the industry, returning more of the earnings to the investor.
Best-Of-Breed Investments
Wellspring takes a deeply passive (but not strictly "indexed") investment approach to portfolio structure. Our strategic partner is Dimensional Fund Advisors (DFA). They pioneered passive investing using the information embedded in market prices combined with fundamental data to identify differences in expected returns among securities systematically. DFA has continually demonstrated exceptional prowess at managing specialized funds, maximizing potential returns, and minimizing expenses.
Individuals cannot invest in the funds utilized by Wellspring on their own. They are generally restricted to large investors and corporate pension plans for companies such as AT&T and Boeing. This helps keep the funds performing well without driving up the costs in the funds with undisciplined small investors.
Our selection of DFA for our investment strategies is based on their deep understanding of the following principles after decades of research:
Passive investing wins. The high cost of administering an actively managed fund can cost you 10-30%1 of its possible return. If you have a taxable account, it’s almost impossible to win.
The last group of credible researchers who looked at this subject concluded that your chance of finding a proper outperforming fund was 160:1,3, and even then, they could not rule out the impact of luck on that particular choice.
Diversification is key to risk management. Our investment strategies are designed to protect against “all-your-eggs-in-one-basket” risks. The investment array we bring to the table will put you in 30 to 38 distinct institutional asset classes, instantly diversifying you across thousands of companies around the globe.
The most reliable way to increase returns is to lower costs. There are many elements involved in the cost of investing. These include trading costs, taxes, and management fees, to name a few. In some managed funds, these costs can exceed 1/3 of your returns. Consider this carefully: whether the fund goes up or down, the fund will always take 1/3 of the returns away from the investor. Dimensional Funds works very hard to minimize tax, trading intelligently, and management costs to deliver some of the lowest fees in the industry, returning more of the earnings to the investor.
Be An Informed Investor
“We have met the enemy, and it is us.”4 Time and time again, the average investor receives less than 50% of the returns from their investments.5 Our job at Wellspring is to transform our clients into great investors and stop them from hurting themselves.
The most valuable tools we can offer are discipline and knowledge: discipline to stay the course when the market is scary and the knowledge to understand how financial investments work.
1. Dimensional Fund Advisors, “The Science of Investing,” 2011.
2. Quote from Jonathan Clements in the Wall Street Journal (December 22, 1998), “If index funds looked great before taxes, their performance is almost unbeatable after tax, thanks to their low turnover and thus slow realization of capital gains.”
3. Barras, Laurent, and Wermers, Russ and Scaillet, O. – “False Discoveries in Mutual Fund Performance – Measuring Luck in Estimated Alphas,” Journal of Finance, February 2010.
4. Quote by Walt Kelly’s comic strip character, Pogo, and first used in a poster for Earth Day in 1970.
5. Swedroe, Larry E, “What Wall Street Doesn’t Want You To Know,” (2001, page 145).
Learn More About Wellspring
Wellspring offers a variety of financial services, including investing assistance. All of our advice is customized to your unique goals and circumstances.
