Investment Philosophy

GLOBAL PERSPECTIVE AND SPECIALIZED EXPERTISE

Financial Guard’s Investment Committee developed the investment philosophy and process used in the construction of the multi-asset allocation models. The importance of diversifying portfolios across asset classes has long been the foundation for managing risk and return. Utilizing inputs from QS Investors, LLC, an affiliate of Financial Guard (“QS”), we provide institutionally managed portfolios, designed to help address your investment objectives. QS relies upon its global perspective on capital markets and expertise examining complex market dynamics to provide guidance and advice to Financial Guard’s Investment Committee in developing portfolios for your investment needs. In addition to benefitting from the insights provided by QS, the Investment Committee may also use other independent third-party research companies when developing its multi-asset class allocation models and asset allocation recommendations.

MODERN PORTFOLIO THEORY

Financial Guard’s approach to building asset allocation models is based primarily on the principles of Modern Portfolio Theory (“MPT”). At its core, MPT is a mathematical framework for diversification, or the combination of different investments within a portfolio. The theory suggests that combining investments that behave differently from one another spreads the risk among different types of securities, which could limit the risk of the total mix while improving its potential return. Diversification forms the basis for the Financial Guard asset allocation and investment philosophy. By mixing asset classes that behave differently from one another within a portfolio, Financial Guard seeks to provide better outcomes in an effort to help clients meet their investment objectives while mitigating potential risks.

LONG-TERM APPROACH

The foundation of Financial Guard’s investment process is a long-term strategic asset allocation rather than a short-term tactical approach, which means that we are not frequently re-positioning your portfolio in an attempt to anticipate which asset class will outperform in the near term and chase returns. Rather, Financial Guard implements a long-term strategy based on historical market relationships and a longer term forecast. As some research suggests, a diversified portfolio, properly rebalanced with minimal transaction costs and advisory fees, is optimal for long-term investing.

ACTIVE AND PASSIVE INVESTING STYLES

At Financial Guard, we understand that not all clients want passively managed index funds or exchange traded funds and that not all clients want actively managed investments such as mutual funds. This is why we give our clients a choice. For many clients, low cost exposure to market-based indices is preferred, while others may want to stay with traditional actively managed mutual funds that seek to generate higher returns, albeit at a slightly higher cost. We are agnostic and allow our clients to choose for themselves.

REBALANCING: STAY THE COURSE

Over time, asset classes will outperform and underperform at different times during the market cycle. Our investment process recognizes that this occurs and ensures that our portfolio models have a variety of asset classes that perform differently across market cycles. For this reason, we rebalance, or trim positions that may have become overweight and add to those that may have become underweight as a result of market performance. We generally review your portfolio every quarter and will use a 10% drift from the target weight as a guidepost for when to consider rebalancing. Because our investment philosophy places an emphasis on asset allocation, we recommend that clients maintain their optimal asset allocation as closely as possible. Quarterly reviews allow for proper balance to your portfolio while minimizing transaction costs and redemption fees that could be associated with more frequent rebalancing.

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