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True Wealth Design's investment strategy is based on theories rooted in award-winning academic and nobel-prize-winning research: namely, Modern Portfolio Theory and Structured Investing.
Modern Portfolio Theory is derived from rigorous and ongoing research by leading academics specializing in finance and economics. The key insight is that the risk of an individual asset is of little importance to the investor. What matters to the investor is the asset’s contribution to the portfolio's risk as a whole. In other words, adding the risk of one asset to the risk of another reduces overall risk.
Structured asset class investing is rooted in research by two of academia's leading financial economic researchers, Eugene Fama (University of Chicago) and Kenneth French (Dartmouth College). The key insight of structured investing is that the stock market is mostly "efficient" and that no active investor has the ability to consistently beat the market through timing the market or shrewd stock picking.
Structured investing is the art of investing in multiple asset classes to maximize return and minimize risk. Examples of asset classes include large and small-cap stocks, value and growth stocks, international stocks, and short or intermediate-term bonds. Structured managers diversify broadly within and across asset classes according to investor risk preferences. Structured managers seek returns for their clients as much as active managers do, but instead of chasing performance, structured managers generate better returns by employing a broadly diversified set of low-cost, tax-efficient, asset-class strategies.
Central to structured management is the acknowledgement that historically active management has not been able to outperform the returns generated by asset classes. In reality, no one knows in advance which managers will outperform; the odds of selecting one are low; and the results achieved may be due to blind luck. We don't believe building a portfolio and achieving a client's life goals should be left to luck.
In the final analysis, countless studies demonstrate that active managers typically under perform passively managed alternatives by a substantial margin due to poorly timed investments, poor investment choices, excessive trading, and exorbitant fees. The benefits of active management are realized by fund management companies, not to investors.
The combination of a broadly diversified, structured investment approach and True Wealth Design's academic perspective on the markets defines the strategies that allows True Wealth Design to provide clients with prudent, long-term, goal-driven investment portfolios.
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