Our Investment Approach
Our investment strategy is built upon years of expertise and a strong conceptual framework that emphasizes focusing on the things that can be controlled. Explore the five concepts of our consistent and disciplined investment philosophy.
1. Perform Due Diligence
In choosing a mutual fund, Barnett Financial certainly considers past returns. At the same time, as past outcomes may not be an indicator of future returns, rather than being consumed with the past, in performing our investment due diligence we tend to focus on process and governance issues:
- Does the firm have and adhere to a rigorous process in its decision-making?
- Does the fund manager personally invest significant resources in his or her own fund?
- Are the fees reasonable for the category?
- Do the fund manager and the corporate parent seem to have integrity? Do they answer questions in a straightforward manner?
2. Minimize Investment Fees
In buying a mutual fund, higher fees do not necessarily signal a better fund. On the contrary: Other things being equal, higher costs result in lower investment returns. The manager of a mutual fund must deliver enough returns to compensate for the fund’s expense ratio before chalking up the first dollar of return to the fund’s shareholders. The higher a fund’s costs, the higher the hurdle.
Barnett Financial seeks out funds that have lower fees relative to their peers. Moreover, as an institutional investment firm, we often have access to institutional share classes which tend to have lower expenses than those available to individual investors.
3. Minimize Tax Liabilities
It doesn’t take a financial planner to recognize that taxes can take a huge bite out of investment returns, particularly in taxable accounts. Barnett Financial works to control taxes in non-retirement accounts by using tax-efficient investments, taking advantage of tax loss-harvesting opportunities, and implementing asset location strategies.
For those clients seeking capital preservation, we typically use municipal bonds to generate tax-free returns since municipal bonds, unlike corporate bonds or treasuries, are tax-exempt.
Unlike many larger firms that require new clients to sell all of their investments and use only those vehicles the firm recommends, Barnett Financial takes into consideration the tax implications of selling securities before implementing a new portfolio.
4. Design a Portfolio that Works Together
An investment portfolio should be more like a tapestry than a collection of baseball cards. The threads must work together to achieve the desired effect. For each of our clients, we weave a portfolio of investments that work well together and that reflect your unique circumstances and needs.
To diversify the investments of our clients and reduce the associated risk, Barnett Financial selects investments representing a variety of asset classes, geographic regions and business sectors.
5. Protect Against Emotional Decision-Making
Barnett Financial does not use market-timing techniques, but instead uses a disciplined buy-hold-rebalance approach. Study after study shows that frequent traders and market timers earn returns significantly lower than market benchmarks. Such investors tend to respond emotionally to volatile markets, which ultimately results in buying high and selling low.