In evaluating potential wealth advisors, it’s critical to understand the philosophy guiding their work. At Valentine Wealth Management your portfolio will be customized to your goals, risk tolerance, and suitability using low cost Exchange-Traded Funds (ETFs) and Mutual Funds in a diversified strategy that reflects your ability to withstand market volatility. We utilize Modern Portfolio Theory and Passive Investment Management as described below. Our portfolios are actively monitored by the advisor with goals of avoiding unnecessary risk and avoiding funds that carry high management fees, which eat away at your earnings over time. We don't believe in market timing or stock picking.

Modern Portfolio Theory (MPT)

The underlying principles of MPT are:

• Investors are risk averse. The only acceptable risk is that which is adequately compensated by an expected return. Risk and investment return are related and an increase in risk requires an increased expected return.

• Markets are efficient. The same market information is available to all investors at the same time. The market prices every security fairly based upon this equal availability of information.

• The design of the portfolio as a whole is more important than the selection of any particular security. The appropriate allocation of capital among asset classes will have far more influence on long-term portfolio performance than the selection of individual securities.

• Investing for the long-term (preferably longer than ten years) becomes critical to investment success because it allows the long-term characteristics of the asset classes to surface.

• Increasing diversification of the portfolio with lower correlated asset class positions can decrease portfolio risk. Correlation is the statistical term for the extent to which two asset classes move in tandem or opposition to one another.

Passive Investment Management 

• Passive investing involves building portfolios that are composed of various distinct asset classes. The asset classes are weighted in a manner to achieve the desired relationship between correlation, risk, and return. Funds that passively capture the returns of the desired asset classes are placed in the portfolio. The funds that are used to build passive portfolios are typically index mutual funds or exchange-traded funds.

• Passive investment management is characterized by low portfolio expenses (i.e. the funds inside the portfolio have low internal costs), minimal trading costs (due to infrequent trading activity), and relative tax efficiency (because the funds inside the portfolio are tax efficient and turnover inside the portfolio is minimal).