Download more of something often means less of something else

MONTHLY CLIENT LETTER
Investment Management
MORE OF SOMETHING OFTEN MEANS LESS
OF SOMETHING ELSE
By Gene Balas, CFA
t United Capital, we often say, “More of something often means less of
something else.” We repeat this phrase to ourselves and to our clients because
we believe that it captures an important investment truth that can help us reach
our FinLife goals. In fact, it resonates so strongly with us that we’ve designed a
graphic representation of this concept as it relates to our investment platform. The image, a
triad or trident, seeks to distinctively define what each strategy is – and what it is not.
A
When you and your United Capital financial adviser meet to develop or update your
Personalized Portfolio, you will notice that our strategies appear on a trident, with low cost
tracking to a benchmark at the center, and with mutually-exclusive axes radiating from there
for outperformance, protection, and tax minimization. So what does this picture really say? We
contend that the trident highlights the investment choices we need to make when identifying
the investment goal for a specific, individual account. Consider, for example, the resources
that must be expended in order to achieve outperformance relative to a benchmark index, and
how that must necessarily move away from “low cost” solutions. Moreover, if that strategy
successfully outperforms a benchmark, it will no longer closely track
that benchmark, much less be tax efficient. In a similar vein, a
strategy whose primary focus is on risk avoidance can’t, at
the same time, take aggressive positions that could pay off
handsomely, because it could instead suffer notable losses
if the investment thesis doesn’t pan out. No investment
professional has a crystal ball, so it is impossible to
invest in a strategy that can exploit potential profits yet
takes no risks at all. Opportunities, by definition, come
with some sort of risk or another. Otherwise, they are
not opportunities.
By prioritizing which matters most to you for each
of your particular accounts – low cost tracking,
outperformance, tax minimization, or protection – we aim
to provide solutions that best fit with your highest need for a
specific account. Of course, these are spectrums, not a
© 2015 United Capital Financial Advisers, LLC. All Rights Reserved
www.unitedcp.com
July 2015
MONTHLY CLIENT LETTER
Investment Management
yes/no decision. One can have degrees to which an investment focuses on outperformance,
for example. In fact, the spectrum can be quite broad. Even within the same investment series,
you can choose, hypothetically, between a 100% equity version and a balanced version that
contains varying elements of fixed income.
Of course, every investor is a complex individual and often has many nuanced investment
objectives and accompanying emotions about investing. The answer of how to address these
competing agendas is to reconcile your asset constituencies with your various, competing
investment goals. Many clients have different accounts representing distinct pools of funds,
each with a separate time horizon and investment objective. One may invest a retirement
account entirely different from the college savings account for a child now entering high school.
And then the same client may have one pool of funds with which they can take absolutely no
risk and another pool of funds with which they can afford to take significant risks, depending
on the ultimate goals that those funds serve. Each account may have a different objective – and
thus a different solution, on a different axis on our platform, all aggregating up to a very
multi-faceted approach to investing.
That means that our paradigm of viewing our investment platform holds true when one
disaggregates your entire finances into a more easily understood (not to mention more
actionable) framework of how to invest each of your individual accounts. And it is at this
juncture where our triad fits into the equation.
By identifying where a particular portfolio fits onto the triad, you can easily conceptualize
the idea that more of something often means less of something else. A greater emphasis on
protection by necessity means that one can’t focus on outperformance or follow a lowestcost index strategy, and so on. By putting investments into this framework – and selecting
investment vehicles that match your specific and mutually exclusive goals for an account – we
can best help you achieve your goals. And by understanding this tradeoff upfront, your journey
to your investment destination will likely take a more satisfying and appealing route.
Disclosures:
United Capital Financial Advisers, LLC (“United Capital”) provides financial life management and makes recommendations based on
the specific needs and circumstances of each client. For clients with managed accounts, United Capital has discretionary authority over
investment decisions. Investing involves risk, including possible loss of principal, and clients should carefully consider their own investment
objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained in this piece is
intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.
Please contact your financial adviser with questions about your specific needs and circumstances.
The information and opinions expressed herein are obtained from sources believed to be reliable, however their accuracy and completeness
cannot be guaranteed. Opinions expressed are current as of the date of this publication and are subject to change. Certain statements
contained within are forward-looking statements including, but not limited to, predictions or indications of future events, trends, plans
or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown
risks and uncertainties. Investing strategies, such as asset allocation, diversification, or rebalancing, do not assure or guarantee better
performance and cannot eliminate the risk of investment losses. There are no guarantees that a portfolio employing these or any other
strategy will outperform a portfolio that does not engage in such strategies. Tactical Asset allocation strategy is not for every investor due
to its potential higher tax liabilities.
Past performance is not indicative of future results. An investor cannot invest directly in an index. Moreover, indices do not reflect
commissions or fees that may be charged to an investment product based on the index, which may materially affect the returns presented.
© 2015 United Capital Financial Advisers, LLC. All Rights Reserved
www.unitedcp.com
July 2015