BENEFITS OF OUR INVESTMENT APPROACH
Low Cost Asset Class Funds
The Sterling Group seeks to capture long term market returns while reducing portfolio risk through diversification. In implementing portfolios, the Sterling Group uses low cost asset class funds or ETF’s.
Sterling Group favors low cost asset class funds from Dimensional Fund Advisors (DFA). DFA is a mutual fund company founded in 1981 that has been a pioneer in applying long term academic research to investment markets. 3D Asset Management is one of a select group of Registered Investment Advisors that have access to DFA mutual funds.
Strategy to Enhance Returns
The Sterling Group avoids active management (picking stocks, market timing) strategies to improve returns. Not only are the statistics very discouraging on the efficacy of active management, it requires the client to continually invest time and energy evaluating their advisor's active management decisions. Based on long term research from DFA and others the Sterling Group looks to exceed market returns by favoring asset classes that have historically exceeded the long term return of other asset classes. Hence the structure of Sterling Group portfolios favor small cap asset classes over large cap asset classes and value asset classes over growth asset classes.
Investing in one company or industry increases portfolio risk without increasing expected portfolio return. Risk can be reduced through broad diversification. There are many parameters that define the stock market:
Stocks versus Bonds
Domestic versus International versus Emerging Markets
Growth versus Value
Large Cap versus Small Cap
Other asset classes such as Real Estate
A properly diversified portfolio will contain all of these elements organized in a disciplined distribution. The future is uncertain. Managing portfolio risk requires that you not have too many eggs in any one basket.
Understanding Investment Markets
Markets are volatile in the short term. The media will publish articles that will make you second guess a sound strategy. Understanding how markets work helps clients remain disciplined when faced with short term volatility. We want our clients to have realistic long term goals as well as an understanding of how to achieve those goals and what to expect along the way.
We want our clients to understand what drove their return. The performance of individual asset class funds fully explain a client’s portfolio return. There are no active manager decisions that need to be evaluated.