At Mulland Fraser, we employ a disciplined, fundamental research methodology to construct low-turnover portfolios with the potential to generate above average long-term returns.
Our active management investment strategies seek superior risk-adjusted returns by recognizing and vetting ideas with a high degree of conviction through rigorous fundamental research. Our investment team adheres to tried and tested procedures that enables us to consistently further our goals.
In addition to achieving higher long-term returns, capital preservation is a crucial aspect of our work as financial advisors. Together, these two objectives require determining the appropriate risk-to-reward ratio for each individual client’s circumstance. Diversification, or spreading risk across several asset classes and investments, each with a separate return profile, is a key strategy in this regard. Diversification, which is anything but straightforward, necessitates a nuanced, analytical approach.
Clients often wonder how they can effectively protect their portfolios from occasional stock market declines. As seasoned professionals, we are accustomed to navigating turbulent capital markets. We emphasize the benefits of rebalancing. Certainly, as interest rates rise, bonds become more appealing relative to equities. Bonds, like any other asset type, entail risks that must be managed in accordance with client objectives. We also note the importance of maintaining appropriate cash reserves and money market instruments in order to prevent selling securities during unfavorable periods to fulfill cash needs.
Diversification: A Proven Solution
Diversification is a proven method for mitigating risk, which entails spreading one’s investments over several asset types. On the surface, this strategy appears simple: Own a variety of asset classes and securities so that some should perform well while others are under pressure. Given how difficult it is to forecast when a certain asset will outperform others, our investment philosophy is to develop a strategic asset allocation framework for each client based on their risk/return objectives. On the basis of this approach, we advise clients to stick with their established plan, making adjustments only when an asset class seems markedly over or undervalued.
Each asset class reacts differently throughout the various economic cycles. In a high-growth, moderate-inflation environment, equities prosper, whereas many suffer during recessions. Commodities are generally very fond of inflation. Preferred stocks and bonds can be a portfolio’s savior during weak markets, but a drag during bull markets. The best method to avoid overexposure to any one economic scenario is to diversify one’s portfolio among different asset categories.
