The first component of our investment philosophy is that “markets work.” This statement evokes the notion that markets are good at setting prices. The recently announced Nobel laureate, Eugene Fama, who is credited with coining the term “efficient markets,” put it as follows: “In an efficient market, prices fully reflect available information.” If you believe that, it will guide your approach to investing. The following video is helpful in explaining the process of how a market can set prices.
Our approach to investing involves exposing our clients to the portions of the market that deliver the best risk adjusted returns and using fixed income to manage the clients’ overall risk level. Avoiding attempts to “beat the market” helps us keep clients focused on using the market to achieve their long term goals.