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Investment Philosophy

PWL’s investment philosophy is based on science, not fads. There is overwhelming academic evidence that stock picking and market timing are not likely to add value: the wisest approach is to simply capture the returns of the global markets. Our strategies are based on the work of distinguished academics, including Nobel laureate Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College.

While many portfolio managers attempt to add value with forecasts and guesswork, we add value for our clients by focusing on what we can control.

Adding Value; Reducing Risk

Markets are Efficient

Active managers can’t consistently beat the market. While prices might not always be right, but the market is the best tool we have for assessing value. The evidence is clear that efforts to identify mispriced stocks are rarely rewarded.

Diversification is Key

Investors are rewarded for taking risk in the equity and bond markets, but not for the risk of holding individual securities. By building portfolios with thousands of stocks and bonds we are able to capture the returns of the markets with less volatility.

Risk and Return Are Related

Increasing the expected return on a portfolio requires additional exposure to the equity market. In addition, research reveals that a “tilt” toward small-cap and value stocks (which can be riskier than the broad market) can increase expected returns over the very long term.

Portfolio Structure Explains Performance

Asset allocation—not picking stocks or timing the market—accounts for most of the performance in a diversified investment strategy. Our portfolios have long-term asset allocation targets and are rebalanced when necessary.

Costs and Taxes Matter

Investors only keep net returns, so every dollar saved is a dollar earned. We use low-cost products and manage portfolios in a tax-efficient way to make sure clients keep as much as possible.

 

Learn about PWL’s Academic Approach