Fundamentals of Fund Selection

| July 15, 2019
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One of the most common questions clients ask is, "How do you choose which funds I am invested in?". This responsibility does not fall to one individual, but rather it is the responsibility of our Investment Committee. The committee is made up of our team of investment advisors, a CPA, and paraplanners, and it meets at least once per quarter to discuss a variety of topics, including current market conditions, our existing portfolios, and changes to consider within these portfolios. We view portfolio construction as an ongoing process rather than a one-time event.

This process began for Financial Plans & Strategies in late 2015, when we became an independent Registered Investment Advisor firm. For eight months prior to that time, our team researched hundreds of mutual fund companies and determined that three main fund companies – American Funds, Dimensional Funds and Vanguard – met our rigid requirements of low fees, quality company philosophy, and good long-term return on investment.

When deciding which mutual funds to include in our model portfolios, we look at historical returns, current market conditions, and the risk/reward of each investment. We have devised over twenty model portfolios, comprised of mutual funds from American Funds, Dimensional Funds and Vanguard, and utilizing a diversified balance of their best funds. These three fund companies provide our clients exposure to all sectors of the market while minimizing the risk of investing. As mentioned in previous blog posts, we are firm believers in the power of diversification (read more on our blog here and here) and the importance of long-term investing.

To determine the custom model portfolio to best fit each client's preferences and needs, our advisors discuss each client's individual goals, time horizon, and risk tolerance, employing our 12-question Investor Profile Questionnaire. If a client has specific goals or needs, we can provide an even more personalized investment plan. For instance, we might add ESG (Environmental, Social & Governance) funds to a client's portfolio if the client would like to put an emphasis on socially conscious funds, or CDs if the client has a specific short-term goal in mind. No matter what your goals may be, our aim is to provide a personalized experience to you, the client.

After we construct a portfolio that fits the client's needs, our job is still not done. As mentioned earlier, we view portfolio construction as an ongoing process. We continue to monitor each client's portfolio on a regular basis, making changes as needed. To find out more about our portfolio daily monitoring system, read our blog post here.

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