Investment Philosophy

It’s easy to say you’re an aggressive investor when everything is going well, but could you stick with your plan if your investments were to drop in value by 20% or more? Understanding the true upside and downside of your strategy is critical to ensuring you can stick with your plan during the bad times so you can stay on track with your goals.

Some investors think they need to pick the right stocks or move in and out of the market at the right time in order to succeed. However, studies have overwhelmingly shown that these strategies tend to dramatically underperform the market over time. They also result in a lot of unnecessary stress and increased risk.

It’s all about time in the market, not timing the market. We recommend a systematic, disciplined approach consistent with your goals while minimizing risk through proper diversification. We evaluate and help you understand what you currently have, then carefully craft your investment portfolio based on sound, time-tested principles to improve your probability of success throughout the inevitable ups and downs of life. See below for more details on our core investment principles.

“The important thing about an investment philosophy is that you have one you can stick with.” – David Booth, Founder of Dimensional Fund Advisors

“Everybody has a plan until they get punched in the mouth.” – Mike Tyson

Capstone Capital Investment Principles

Prudence
Smart investing is not about forecasting the future. It is about managing probabilities, understanding what drives market returns, and choosing a strategy that matches your personal goals and risk tolerance.

Objectivity
Investment decisions based on subjective assessments, hype, or emotions often lead to higher losses and missed opportunities. Objective methods based on decades of research improve the likelihood of positive outcomes and are easier to stick with during market turmoil.

Discipline
A systematic, disciplined approach to investing through the rise and fall of market cycles tends to result in much better long-term performance than trying to predict the “right time” to invest.

Diversification
Investing in a mere handful of stocks subjects you to more risk than necessary and normally results in lower returns than a diversified approach. You can earn excellent returns with much lower risk by investing in thousands of different types of stocks and bonds worldwide. True diversification also considers how your investments relate to one another, rather than owning several versions of the same thing.

Efficiency
Frequently trading stocks and bonds in a portfolio creates a lot of unnecessary cost that can dramatically diminish performance. Tax-efficient strategies with low turnover and low internal costs improve the likelihood of a successful outcome.

Flexibility
Some financial products lock you in for many years with huge penalties for exiting early. Life is unpredictable and situations change. You should be free to change your investing strategy anytime without penalty.

Simplicity
Your investments should be easy to understand and easy to implement. They should not require a lot of ongoing effort on your part so you can focus on what you do best. Time and hassle are true costs that can diminish your investment performance and quality of life.

Accountability
You are entitled to clear periodic updates on your investment performance and progress toward your goals. Advisors who are compensated by a small percentage of your assets each quarter rather than a large one-time commission must continually earn your business by consistently delivering value to you.

Transparency
You deserve to know what you are investing in, all possible outcomes of your investing strategy, the fees you are paying, and any potential conflicts of interest your advisor may have.

Collaboration
Collaboration with you and your other advisors, such as your accountant, attorney, banker, and insurance agent, ensures all strategies are aligned to help you accomplish your goals.

Independence
It is important to work with advisors who are not subject to any mandates or sales quotas from other investment companies, so they can be free to recommend only what is in your best interest.

Frequently Asked Questions

How will you choose investments to recommend to me?

We always start with your goals. What are you trying to accomplish with this money, when will you need to spend it, and what is your feeling about risk? We will walk you through best and worst-case scenarios for a variety of investment allocations. Then you can make an educated decision, with realistic expectations of how your investments might perform during good times and bad times. Once we know your target allocation, we will build a diversified portfolio of stocks and bonds to match your objectives – typically over 13,000 holdings total.

How will you manage my assets to help minimize taxes?

If you are still working, we can help you explore a host of tax-advantaged retirement savings options so you can reduce taxes now and/or in retirement. For assets held outside of retirement plans, we use very tax-efficient investments with low turn-over to minimize capital gains taxes. If certain current assets have grown significantly since you bought them, we can include them in your customized allocation to avoid triggering a large taxable gain. We can also build tax-free municipal bond portfolios and employ tax-loss harvesting strategies to help reduce your tax burden.

How do you measure success?

Some advisors claim they can “beat the market,” measuring their performance against certain benchmarks, such as the S&P 500 index. However, most of them cannot consistently deliver on this promise. The reality is that you will almost always outperform some benchmarks and under-perform others, because your portfolio will include elements of many different benchmarks combined. It is much more meaningful to measure your success by whether you are on target to meet your goals. Will you have enough to live the retirement lifestyle you want for the rest of your life, regardless of short-term market fluctuations? Will you have enough to send your children or grandchildren to college? Clarity around your progress towards your goals brings peace of mind and the freedom to focus on what you can control.

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