Our Investment Philosophy
Our philosophy of wealth management is the result of decades of experience and shapes the process throughout our working relationships.
In developing investment management plans, we subscribe to a portfolio approach that emphasizes quality, diversification, objectivity and flexibility. We highlight our philosophy in three distinct ways:
- We believe that a commitment to wealth preservation and enhancement should be the cornerstone of an investment program designed to meet your unique needs.
- We believe the distribution of assets within the portfolios should be based on meeting your needs with as much certainty as possible.
- We believe that the ultimate success of your program is dependent on long-term commitment to quality investment selection and a continuing flexibility to adjust the program as conditions warrant.
The key philosophical concepts that we apply when working with clients are:
- Customization and personal service with direct access to decision-makers
- Diversification across markets, asset classes, sectors and securities
- Objectivity and flexibility in investment solutions and program structure
- Tax Mitigation –Tax efficient strategies and tactics
We see the forest AND the trees.
At HFM Wealth Management we pursue a comprehensive and disciplined approach to investment management. Each client has different needs and we draw on our entire team’s breadth of experience when creating your unique investment program. We take the time to understand your situation and address any and all concerns that you may have including risk factors, taxes, need for current income, and growth for future generations.
We like to invest directly in what we believe are well run companies that have good growth prospects which are attractively priced relative to the market, their peers, and also to their expected future growth.
We invest broadly across the entire spectrum of the ten Standard & Poor’s (S&P) 500 sectors. We generally do not exclude any of the sectors, but will vary our individual sector allocations from how the index is constructed. We choose to overweight/underweight sectors depending on our view of each sector’s relative attractiveness given the economic backdrop. Our sector commitments are routinely monitored. The weights are normally no more than 4 percentage points higher or lower than the sector’s actual weight in the index. We also avoid allocating more than 20% to any one individual sector, even if the sector represents more than 20% of the index. (We have seen several examples in the past when both Technology and Financials became very large components of the index. While such an imbalance can go on for a while, it may eventually cause market dislocation/correction as it did in 2000 and 2008).
We generally avoid turnaround situations as well as companies with overly levered balance sheets. In addition, we like to see a track record of public results so we normally will not purchase new initial public offerings (IPOs). We tend to avoid companies that are overly dependent on a single product or person, or that specialize in or are dependent on a trend or fashion.
Fixed Income Selection
At HFM Wealth Management we seek to design fixed income portfolios that provide the best risk-adjusted income, while still serving to provide diversification and meeting the asset allocation objectives established for each client. The fixed income market is vast. Our independence gives us the flexibility to acquire bonds from multiple vendors, rather than be limited to any one company’s inventory. We use a matrix approach to manage the fixed income portion of portfolios. We do this by over weighting shorter-term maturities in relatively low interest rate environments, and then utilize longer-term maturities when market interest rates are relatively high. HFM uses investment grade securities with maturities generally ranging up to 15 years.
Unlike stocks, bonds in the secondary market usually do not trade in a centralized auction environment. Instead, they are generally purchased from a broker’s inventory. The size of an order can have a strong influence on the execution price of the trade which in turn impacts a bond’s yield. As an institutional investment manager for community banks we trade bonds in quantities large enough to obtain favorable pricing compared to a typical “retail” order. Our individual clients are then able to benefit from trades at prices not likely obtainable on their own and our institutional clients benefit from HFM’s decades of experience and relationships with multiple bond sources.