Investment Philosophy

Confidence Through Discipline

Investors, individuals and many professionals alike, just can’t help it; they want to beat the market, become the next Warren Buffet and spend an inordinate amount of time and resources in this endeavor. In spite of their best efforts, most investors fail. Why? It has been our experience that investors without core beliefs tend to wander from strategy to strategy, drawn by anecdotal evidence or recent success, creating costs and incurring losses as a consequence. Investors with a clearly defined investment philosophy tend to be more consistent and disciplined in their investment choices. We will work with you to define your feelings about risk, time horizon, tax status and your specific goals and align those with a core asset allocation discipline, the foundation of our investment philosophy.

In a world of changing markets, Keeney Financial Group takes a deliberate approach to capturing opportunities and managing portfolio volatility. Prudent investing requires taking calculated risks while seeking more consistent performance. We believe the most dependable way to achieve this is through disciplined asset allocation.

Asset allocation is the process of distributing investment capital across various asset classes, each of which may behave differently at any particular time. Though asset allocation does not ensure a profit or protect against losses, it does help us to diversify our clients’ portfolios and help promote performance of individual investments. The science that we apply to investing is derived from the disciplined structure that Modern Portfolio Theory brings to the process of allocating assets.

Modern Portfolio Theory

Many decades of experience have demonstrated the importance of asset allocation and diversification. Since the 1950s, economists have used mathematical models to calculate the risk and return of particular asset classes and specific investments and how they behave in relation to one another.

These studies helped lay the foundation for modern portfolio theory, which provides the underpinning for asset allocation, and proved quantitatively that diversifying by adding a less correlated security or asset class will lower a portfolio’s volatility. Of course, correlations are dynamic and change over time. But as a rule, the benefit of reduced volatility increases as the correlation between the performance of two assets decreases.

Modern Portfolio Theory has significant practical applications for our clients. Using models that apply this theory and historical data allow us to estimate the expected returns of all possible combinations of assets that create a portfolio. While these estimates aren’t accurate forecasts of the future, they do provide a tool that we utilize to make informed choices, rather than acting emotionally, or purely in response to market conditions. These models allow us to better understand relative levels of risk and return and adjust them to better suit our clients’ individual needs.

Strategic Asset Allocation

While asset allocation has always been a wise strategy, we believe it has become even more essential in recent years. A growing array of investment options, both international and domestic, complicates the portfolio construction process. At the same time, the expanding choices offer new ways to increase potential return and manage volatility.

The asset allocation process at Keeney Financial Group involves more than simply applying a formula to an investor’s portfolio. We apply sophisticated analysis to help you protect your purchasing power against inflation, taking into account your investment preferences and specific objectives. We also understand that making initial investments for a portfolio is just the beginning. Long-term success requires ongoing management to keep you aligned with your objectives. Our strategic allocation plan provides a guide for keeping you on track. By addressing dynamic changes in the market, tax revisions and life changes, you will experience confidence through discipline.