Protect, Protect, Protect
Before you choose to work with a financial professional, it is important to understand their investment philosophy. This philosophy should act as a set of guiding principles whose threads are carefully woven through all of their client relationships.
The basis of our philosophy is the fact that many people only save and invest money for one reason —to spend it. Whether the plan is to spend their funds during retirement, for their kid’s college, for or a new home, for charity, inheritance, or a rainy day—many people save and invest to spend. If the money that is intended to be spent is not available when it is needed, then a problem exists. Enter the need to protect your hard-earned assets.
There is great debate about what investment strategy performs best – active vs. passive, tactical vs. strategic.
Passive vs. Active Investing
It is generally agreed that strategic asset allocation with rebalancing delivers better long-term performance due in part to lower trading costs and the ability to capture the long-term historic average return. This “buy and hold” works particularly well when investors are investing regularly by dollar cost averaging into their 401(k), 403(b), IRA, etc. throughout their working lives. The key words here are the “long-term”.
We believe that when you are at or near retirement the “rules” change. You are no longer investing for the long term; you are no longer dollar cost averaging into your retirement accounts every two weeks and stock market dips are no longer “buying opportunities”.
In fact, the reverse happens: retirees need to start withdrawing funds to generate retirement income, stock market dips are worrying and lead to dollar cost ravaging, and withdrawals compound investment losses, leading to accelerated depletion of retirement assets. The Dot Com crash in 2000-2002 and the Financial Crisis 2008-2009 saw market losses of more than 50%. If you are at or close to retirement how would another market crash affect your situation?
Active money management can be a better investment strategy for clients at or near retirement. However, traditional active management has typically come at a higher cost and difficulty with consistently outperforming the market.
At Quraishi Wealth Management, we believe in a rules-based approach to investing, blending active and passive strategies, to best achieve your goals.
Smart Beta Investing: The Middle Ground
Think of smart beta investing (also known as factor-based investing) as a middle ground between passive and active investing.
The goal of smart beta is to obtain alpha, lower risk or increase diversification at a cost lower than traditional active management and marginally higher than straight index investing. It seeks the best construction of an optimally diversified portfolio.
In effect, smart beta is a combination of efficient-market hypothesis and value investing. The smart beta investment approach applies to popular asset classes, such as equities, fixed income, commodities and multi-asset classes. Nobel prize-winning economist Harry Markowitz first theorized smart beta via his work on modern portfolio theory.
Rules-Based & Transparent Approach
Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.
Smart beta strategies seek to passively follow indices, while also considering alternative weighting factors such as volatility, liquidity, quality, value, size and momentum. That's because smart beta strategies are implemented like typical index strategies in that the index rules are set and transparent. These funds don’t track standard indices, such as the S&P 500 or the Nasdaq 100 Index, but instead, focus on areas of the market that offer an opportunity for exploitation.
At Quraishi Wealth Management, we are committed to helping our clients achieve their financial goals and secure their future. With our holistic approach to wealth management, we prioritize two essential rules.
Rule #1: Protect Investments Utilizing a Disciplined & Rules-Based Approach
At Quraishi Wealth Management, we prioritize protecting your investments while maximizing returns by blending strategic and tactical management.
Our portfolios employ smart beta strategies, providing retirees with minimized risk and optimized returns through a disciplined, fact-driven approach.
Rule #2: Control The Controllables
There are a lot of things in financial planning and investment management that we can't control: we
can't control the market and we can't control the economy…and we definitely can’t control the current political climate. But there are five things that through experience we've learned we can control.
And if we control these five things, it's the difference between winning and losing. It's a difference between us being very, very successful together in our relationship and those five things that we can control are: Costs, Taxes, Diversification, Alignment (or Risk), and Emotions.
We believe that controlling emotions as an investor can be the most important factor in long-term investing success.
By removing investing prejudices with a smart, disciplined and rules-based approach, and focusing on what we can control through holistic wealth management, we feel investors can substantially increase their probability of success, giving them the freedom to enjoy their retirement and focus on what’s most important to them.
Discover Your Financial Security
Are you on track to retire comfortably? Our financial planning analysis, a SmartWealthTM Plan, is a good way to find out. To schedule your consultation, please call our office at 870-275-4304.