Investment Strategy Summary

The investment strategy involves a three-tiered approach. The first step involves you. JCIM first ascertains who you are--your age, investment objectives, time horizon, risk tolerance and liquidity needs. During this first step, for those investors interested, we will also provide financial planning at no cost to you.

In the second step we combine who you are along with current financial market conditions and our views on the market to develop an investment strategy appropriate to meet your financial needs. The final step involves portfolio management-which is JCIM's security selection and daily risk management.

Portfolio Management

The first premise that we strongly subscribe to is that financial markets are governed by broad macroeconomic factors such as interest rates, credit spreads, the price of the dollar and oil. To fully grasp the influence that macroeconomic factors have on investment portfolios, here are two important statistics:
  • 90% of return differential in diversified investment portfolios is due to asset allocation
  • Since 1990, the average return differential between the best performing sector in the S&P 500 and the worst performing S&P 500 sector has been 50%

Given these statistics, it stuns us when most mutual fund or money managers will describe their fund's/portfolio's performance against the market (which usually happens to be under performance as three out of four actively managed mutual funds fail to beat the market) in terms of individual security selection. What the previous statistics reveal is that investment performance is not necessarily due to individual stock/bond selection, but rather asset allocation in the broader asset or sub-asset class.

So beyond pure individual security selection, an advisor or money manager must be capable of developing the portfolio's hypothesis to consistently add alpha (which is return above what the market average can offer). This is more than a rationale for any one position. In simple terms, what is the portfolio's "bet"? To understand this, the advisor/manager must know how the market is positioned (sector weightings and exposure), know how the portfolio is positioned relative to the market, and have a solid rationale for the differences between the two. In speaking with tens, even hundreds, of portfolio managers it is apparent that the successful ones have a clear understanding of how macroeconomic forces affect their portfolios. They are able to run scenarios on how the portfolio is positioned to profit (or loss) given certain macroeconomic conditions.

It comes as no surprise then that we spend a considerable amount of time understanding the macroeconomic landscape. To implement these views on financial markets, we then use index funds (more specifically, ETFs) as the main instrument in the construction of investment portfolios. Index funds allow us to leverage our macroeconomic opinions on financial markets, while also providing broad diversification. Client portfolios are 50 - 100% comprised of index funds appropriate to meet both the financial objectives of each client and our views on the market. The remaining portfolio consists of individual security selection appropriate for the client. Individual security selection, in a nutshell, focuses on an analysis of valuation, growth & earnings, free cash flow, and qualitative features of individual companies.

Contact Info.

1100 Lake St, Ste 280B
Oak Park, IL 60301
(312) 375-5246
(708) 948-7092


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