We eat our own cooking.
Our investment philosophy is well grounded in academic theory and our experiences in the real world. In addition, we are also substantial co-investors alongside our clients, or to say it simply: we eat our own cooking.
At least one of the four partners owns every stock on our Approved List. Furthermore, between the four partners and our immediate family members, we have well over $10 million invested in the same securities using the same strategies we use for clients.
If we believe investors will be better served using a different strategy, we will lead the way with our own money. Thankfully our strategy has served us well over the years.
Regardless of market conditions, we continue to make progress on our processes and the application of our philosophy.
At Ullico Retirement Solutions, we explore five general tenets to bring a collaborative, personalized approach to managing our client’s wealth:
1. Risk Tolerance
Basic financial theory suggests that all investors are risk averse in that given the choice between two portfolios with the same expected return, they will choose the less volatile option, if it exists. We have found that some clients are risk averse in down markets and risk seeking in climbing markets.
One of our duties is to determine the client’s willingness and ability to take risk. Helping clients understand their risk tolerance is important so they are comfortable with their portfolio’s volatility, while at the same time, are taking enough risk to earn returns necessary to meet their goals.
When creating our asset allocation models and selecting investments, we seek to maximize risk-adjusted returns or maximize the amount of return per unit of risk.
Diversification is perhaps the most important tenet of investing. There are two major risks in the market place, single company event risk and broad market risk. By spreading invested funds across different asset classes and individual securities, it is possible to reduce risk and potentially increase returns. To limit risk, we diversify at three levels: by asset class, sector and individual security.
3. Time Horizon
Before assets are invested, it is crucial to understand the time horizon. Obviously money that is needed in three months should be invested much differently than money that will be needed in ten years. Each individual and organization has unique needs and factors that are taken into consideration when our asset allocation recommendation is discussed.
4. Core & Satellite
For Private Clients, we employ a Core & Satellite strategy that uses passively managed investments as the core and individual securities as the satellites. The core securities allow for an efficient way to broadly diversify at a very low-cost. The individual satellite positions allow us to potentially add value through security selection and manage the portfolio tax efficiently.
Liquidity refers to the ability to sell an investment without affecting the price of the security and to raise cash. We take liquidity into consideration with every security that we purchase, and our objective is to assure a high degree of liquidity in every portfolio. Of course, under extreme market conditions like the days following 9/11 and the panic during the fall of 2008 any security may become illiquid for a period of time.