I’m always amazed by the almost superhuman springs, twists, turns, and flips gymnasts are able to perform with grace and precision. Who could forget Kerri Strug’s seemingly impossible vault of handsprings, twisting dismount, and a perfect landing just seconds after tearing two ligaments on her ankle? Watching from home, I remember anxiously waiting as the judges reviewed her vault with a fine-tooth comb; evaluating the form, height, length, and landing of her performance. To my excitement, Kerri received winning scores and managed to catapult the 1996 US Olympic women’s gymnastics team to gold medal victory.
Giving Investments the Fine-Tooth Comb Treatment
Similarly, we aim to build model portfolios with “gold medal” worthy investments that are equipped to meet your goals even through adverse circumstances. We too, like Olympic judges, evaluate each investment with a fine-tooth comb making sure it meets its purpose in your portfolios. In fact, we routinely complete a seventeen-point criteria review of our model investments. Our investment department team fondly refers to this process as the Morningstar Direct Fiduciary Scorecard Review. For the review, we assess the following:
Performance and Volatility
We look at performance, risk-adjusted performance (alpha), and the volatility of the investment compared to the market (beta) for 1, 3, 5, and 10-year periods. In order for investments to receive points for these metrics, they must place above 50% of comparable peers. For these categories, score points are more heavily weighted towards the longer periods of time with the intent of crediting investments that consistently produce over long stretches of time.
Tenure and Inception
We want your investments to be managed with the wisdom of experience and we want investments that have shown they’re able to adapt through different parts of a market cycle, therefore, we review manager tenure and product inception.
Size and Style
We evaluate the investment’s size and style to identify whether the investment has grown too large to maintain its investment strategy and integrity or whether an investment is too small to keep resources robust (i.e. research, analysts, etc.).
We evaluate investment expenses so performance is not watered down by excessive fees.
Once scores have been tallied by the investment department team, our investment committee talks through each investment to determine whether it meets the gold medal standard.
We want to ensure your portfolio investments can perform through the springs, twist, turns, and flips of any market cycle with grace and precision. The Morningstar Direct Fiduciary Scorecard Review is just one of the many ways we stress test your portfolios. After all, due diligence is one of the key ingredients to maintaining our investment process and ensuring that we are investing your portfolios in the best products. So, the next time you review your portfolio, imagine each investment being able to do this gold winning move through even the toughest circumstances.
Investing involves risk and investors may incur a profit or loss regardless of strategy selected. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. C14-035970