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Clarity's Investment Portfolios
Look beyond the news of today to the long-term growth potential of markets.
We begin with the basic premise that markets have rewarded discipline.
Growth of a dollar MSCI World Index (net dividends), 1970-2017
In US dollars. MSCI data © MSCI 2018, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results. Source: Dimensional Fund Advisors
We Believe in Diversification, Not Speculation
Simply put, diversification means avoiding the common mistake of having all or too many of your eggs in one basket. The “one basket” can refer to either an individual stock or bond or to a single asset class such as emerging markets stocks. At Clarity, our clients are highly diversified both within and among asset classes. If we could pick the top-performing stocks and asset classes in advance, we would certainly do so, but we have yet to see someone who can.
Do you see a pattern in the chart below? Neither do we.
As the chart below indicates, performance from year-to-year is completely unpredictable. This, in a nutshell, is why we advocate owning all the asset classes that are worth owning, and for each of those asset classes, our clients own a wide range of securities.
Our Investment Philosophy is Based on Academic Research, not Speculation
When designing our investment portfolios, rather than looking to Wall Street firms, we rely on Nobel-Prize winning academic research conducted by professors such as Eugene Fama (2013 Laureate for his work in Market Efficiency and Asset Pricing Theory) and Harry Markowitz (1990 Laureate for his formulation of Modern Portfolio Theory). To summarize, our tax-efficient investment portfolios are designed to capture the returns of the global financial markets based upon your individual willingness, ability, and need to assume risk. Learn about Active and Passive Investing.
The Benefits of a Core Investment Strategy
Low-Cost, Globally Diversified, Tax-Efficient Investments
Our low-cost investment portfolios are comprised of no-load (no sales commission), mutual funds from Dimensional Fund Advisors and Vanguard. Dimensional has its roots in academia, particularly in the work of Professor Eugene Fama (2013 Nobel Laureate) of the University of Chicago, Booth School of Business and his colleague Professor Ken French of the Dartmouth University, Tuck School of Business. Its equity funds are structured to capture the risk factors of size, relative price, and direct profitability. Its bond funds are similarly managed based on the risk factors of term and credit.
Core Mutual Funds: Lower Costs Equate to Higher Expected Returns
At Clarity, we utilize total market (Core) mutual funds rather than specific asset class funds. This approach enables our clients to have lower overall expense ratios and lower transactional costs (and possibly taxes). For example, if a small cap stock transitions to a large cap stock, the small cap fund must sell it and the large cap fund will buy it. This can create capital gains within in the small cap fund that may be passed along to investors, in addition to the trading costs to sell and buy. In a Core fund, however, no additional trades are needed. We call this smart investing.
Each highly diversified Core Portfolio is competitively priced with very low weighted expense ratios varying from 0.20 to 0.24% annually. You will have exposure to over 13,000 stocks of different companies from 40 countries around the world, so no matter which one hits a grand slam, there is an excellent chance that you will own it. Your bond allocation will include government and investment-grade corporate bonds. For clients in high marginal tax brackets we may incorporate individual municipal bonds or municipal bond mutual funds within their taxable accounts.
No Cookie Cutter Model Portfolios - Each portfolio is customized to the individual needs of the client.
We recognize that not all investors are well-served by model portfolios, which is why we offer Custom Portfolio options. This can be especially helpful for someone who already has a sensible portfolio of low-cost mutual funds where it would be costly (from a tax standpoint) to transition it into one of our highly diversified portfolios. Our custom portfolios give investors the opportunity to immediately reduce their advisor fees while retaining their existing asset allocation and investments.
Socially Responsible Investing (SRI)
The areas of concern recognized by SRI practitioners are sometimes summarized under the heading of ESG issues: environment, social justice, and corporate governance.
For those investors who desire to align their investment decisions with their views on the importance of preserving the environment and mitigating adverse climate effects, Clarity offers portfolios that utilize the two sustainability funds from Dimensional Fund Advisors that cover U.S. and international developed market equities. These funds place a large emphasis on consideration of greenhouse gas emissions, but they also consider the following factors: Land use and biodiversity, toxic spills and releases, operational waste, and waste management.
The top contributors to greenhouse gas emissions can be underweighted or excluded from the portfolio. Separate consideration is given to potential emissions from reserves, as certain energy companies are particularly vulnerable to future regulations limiting the amount of fossil fuels that can be consumed. Other environmental and social sustainability variables considered for the possibility of excluding certain companies are: Factory farming, cluster munitions manufacturing, tobacco, and child labor.
We incorporate the Vanguard FTSE Social Index Fund which seeks to track the investment performance of the FTSE4Good US Select Index—a benchmark of large- and mid-capitalization stocks that are screened based on social criteria such as workplace issues, environmental issues, product safety, human rights, and corporate responsibility.
The weighted expense ratios of our Socially Responsible Investing (SRI) portfolios range from 0.21% to 0.27% annually.
Source: "The Evolution of Sustainability Investing", Dimensional Fund Advisors, May 2016.
Which Clarity Investment Portfolio Makes Sense For You?
Our Personal Risk Assessment will match you to one of our many low-cost, globally diversified portfolios. There are 20 questions based on your personal financial situation and elements of Behavioral Finance as it relates to investors. The assessment should take no longer than 5-10 minutes to complete.
As part of our commitment to full transparency in fees, we would like to share the costs associated with trading your investment accounts. Our custodian, TD Ameritrade Institutional, does not charge any annual account maintenance fees, wire transfer fees, or ACH transfer fees. Instead they charge a low, flat trading fee of $9.99 per trade to buy and sell the Dimensional funds. TD Ameritrade Institutional provides our clients with some of the lowest trading fees in the industry for Dimensional mutual funds.
The trading cost to purchase one of our diversified portfolios is $60.
Trading costs to buy or sell other mutual funds may be up to $24.00 per fund.
Monthly Investment Plans at TD Ameritrade Institutional: Clients who wish to establish a systematic monthly investment plan (dollar-cost averaging) from their checking or savings account are able to purchase the Dimensional funds free of charge once the initial investment portfolio is established.
Optional Automated Vanguard ETF Portfolios (CRSP Series)
We utilize Betterment for Advisors for our automated portfolio management services.
Betterment does not charge any account maintenance fees or ACH transfer fees. Instead they charge a flat annual fee of 0.25% of the amount you have invested in a Vanguard Model ETF CRSP Portfolio for all automated trading and cash transfers.