We believe investors deserve objective financial advice from advisors who are accountable to put their clients’ interests first. The financial industry is fraught with conflicts of interest. The principal duty of many financial advisors is to boost their firm’s profits. They can legally recommend products and services that are reasonably suitable for a client’s situation, but not necessarily in the client’s best interest.
Capstone Capital is an independently owned SEC registered investment advisor. In this capacity we act as fiduciaries, which means we are accountable to always put our clients’ best interests ahead of our own. We have no affiliation with or obligation to any particular financial institution, so our only duty is to our clients.
We believe investors have the right to know exactly how much they pay in investment management fees and to get straight answers from their advisors when they have questions. We also believe investors should have a clear understanding of what they are investing in and the true risks involved.
Many advisors tend to emphasize the upside potential of various investment options and downplay the possibility of losing money. We prefer to highlight how severe the losses could be for any given investment option so our investors can make informed decisions about how much risk they are really willing to take.
While we don’t expect any of our clients to become experts on financial matters, we feel it is our duty to at least educate them on the basics of successful investing and effective management of their personal finances. Understanding the fundamentals brings greater confidence in their ability to meet their goals, and reduces worry over external forces outside of their control, such as market fluctuations, changing tax rates, and inflation.
We at Capstone Capital also seek to continually improve our own understanding of the ever-changing world of modern finance, as well as how we can better serve our clients.
Each investor has unique goals, perspectives, and attitudes about money. Therefore, we collaborate with each client to create a financial plan and investment strategy tailored specifically to their needs.
Most of our clients also rely on the advice of other experts to help them make sound decisions in every area of their finances. We strive to facilitate open communication and collaboration with our clients’ accountants, attorneys, insurance agents, bankers, and other advisors to ensure that we are all working in harmony towards achieving our clients’ overall objectives.
Money managers often claim they can produce higher returns than the general stock market while reducing risk. They believe through their superior research and insight they can know when is the right time to buy or sell a particular stock, or when is the right time to get in or out of the market.
This sounds very appealing because of course we all would like to earn as much money as possible without losing anything. However, a vast body of academic research indicates that most money managers fail to consistently deliver on that promise. You can always find some who have outperformed the market for a time, but they tend not to repeat their performance, and it’s impossible to know which ones have done so through skill rather than luck.
The problem with this approach is that the attempt to outsmart the market usually results in higher fees, greater risk, and much lower returns than investors could have achieved with a more balanced, prudent strategy. According to DALBAR research, the average annual return of the S&P 500 from 1996-2015 was 8.2%, while equity-fund investors as a whole only earned an average annual return of 4.7% over the same 20-year period, mainly because of their attempts to outperform the market, or for hiring money managers who endeavored to do so.
At Capstone Capital, we do not seek to outperform the market, and we are not swayed by the latest trends or media hype. The market already delivers great returns for those who are willing to stay the course through the ups and down of market cycles, so we simply strive to capture those returns as efficiently as possible and manage risk through proper diversification. (From our ADV: We base asset allocation decisions on academic and long-term market research, not economic conditions or short-term market predictions.) Once we have built a portfolio to match the risk tolerance of each investor, we help them maintain discipline through ever-fluctuating market conditions and periodically rebalance as necessary so they can increase their chances for long-term success.
Although risk can never be fully expunged, one way to significantly reduce risk is through well-designed diversification. Most people acknowledge the wisdom of not putting “all of their eggs in one basket,” but they don’t really know how to measure diversification. They assume that if they own a lot of stuff, they are diversified.
However, true diversification means owning a variety of assets that tend not to behave the same way at the same time. Then if one investment loses value, the loss can be mitigated by another investment that might gain value at the same time.
We have met investors who thought they were well-diversified because they owned many different mutual funds managed by a variety of companies, but they failed to realize that all of those funds were investing mainly in the same small selection of stocks. A well-diversified investor wouldn’t just own a handful of US large growth stocks, but would own thousands of growth and value stocks in large and small companies in a variety of industries throughout the world. He or she would also own cash, bonds, real estate, and other assets not directly correlated to stocks.
This may sound overwhelming, but we take care of this process for our investors. We have the tools to help investors achieve excellent diversification at very low cost and very little effort on their part.
Above all, our main objective is to help our clients build greater confidence in their financial future – confidence that they can accomplish their goals regardless of economic forces outside of their control.
We also strive to earn the confidence of our clients so that they know they have a true friend they can call on in their time of greatest need. Life is full of surprises, and we stand by, ready to assist our clients in finding the direction they need as major life changes provide new challenges and opportunities along the way.