Investment Management Investments
are the most fluid portion of a financial plan. Team Financial
Strategies will spend ample time analyzing investments and judging the
fit of an asset in a client's portfolio. TFS will help clients stay
current on market and economic activity while implementing, monitoring,
and revising their investment portfolio. TFS
believes the successful investor is one who finds investments that are
undervalued or out of favor while having solid prospects and
fundamentals. Client's portfolios are not set in a static asset
allocation. Portfolios are diversified between various asset categories
based on a risk/reward analysis. TFS
recognizes that fees play an important role in a client's rate of
return. Therefore, we will never invest a client's money in load funds
and will evaluate the cost benefit of a mutual funds annual expense
ratio before investing. Some funds will have transaction fees depending
on the fund family's agreement with the custodian
Diversification and Correlation TFS believes that the correlation of assets in your portfolio is vital to diversification. Correlation is measured in the range of -1.0 to 1.0 and measures how an asset moves in relation to another asset in the portfolio. They can be positively correlated, negatively correlated, or have no correlation. If two funds have a correlation of 1.0, then as Fund A increases, Fund B increases at the same rate. At 1.0 they have a "perfect positive correlation". As the scale slides closer to zero, they are less correlated to each other. At 0, there is no correlation between the two assets. As the correlation falls into the negatives, the assets move in opposite directions. Those with a correlation of -1 have a "perfectly negative correlation" and therefore would entirely "hedge" out any gains or losses. Why Is This Important? Over time and in various market cycles, investment correlations will vary. In analyzing risk, it is important to know if during one period or another you have the risk of either having too high positive or negative correlations in your investment portfolio. |
SAMPLE PORTFOLIO CORRELATION CHART |
