An Investment Portfolio Tailored to Your Individual Needs and Goals
We recognize that not all investors are well-served by model portfolios, which is why we offer Customized Investment Portfolio options. This can be especially helpful for someone who already has a sensible portfolio of low-cost mutual funds and ETFs from Vanguard or Dimensional Fund Advisors where it would be costly from a tax standpoint (i.e., significant embedded capital gains) to transition it into one of our highly diversified portfolios. Our customized portfolios give investors the opportunity to immediately reduce their advisory fees while retaining their existing asset allocation and investments.
The Importance of a Customized Investment Policy Statement
An Investment Policy Statement (IPS) describes the investment philosophies and investment management procedures to be utilized in consideration of your long-term goals. The principal reason for developing a customized investment policy and for putting it in writing is to enable you and us to protect your portfolio from ad hoc revisions of a sound long-term policy. Without an investment policy, in times of market turmoil, clients are often inclined to make impromptu investment decisions that are inconsistent with prudent investment management principles. An IPS is intended to provide a well thought out framework from which sound investment decisions can be made. At Clarity, each client receives a customized IPS based on their time horizon, liquidity needs, risk tolerance, tax situation, and other special circumstances.
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 Clarity Capital Advisors advocates 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 Wall Street Hype
When designing our investment portfolios, rather than relying on Wall Street firms, we look to the extensive 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).
Our low-cost, tax-efficient investment portfolios are comprised of no sales commission or 12b-1 fee mutual funds from Vanguard and Dimensional Fund Advisors. Dimensional has its roots in academia, particularly in the work of Professor Eugene Fama 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. To summarize, our portfolios are designed to capture the returns offered by the global financial markets based upon our clients' individual willingness, ability, and need to assume risk.
The Core Investment Strategy
A Smarter Way to Invest
Low cost. No sales commissions. No hidden 12b-1 fees.
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 (fund costs) and lower trading 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 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, this type of trading is minimized. We call this smart investing.
Tax-Efficient Core Mutual Funds: Simplicity Over Complexity
Since utilizing core mutual funds favors simplicity over complexity, it is fair to ask if investors are sacrificing the opportunity for higher returns by not owning highly specific asset class funds such as international small value. Indeed, some advisors will argue that you should have at least a dozen different mutual funds in your portfolio (it certainly makes them look busy). We obviously disagree and not because it makes our job easier to manage fewer funds. Our portfolio management software, enables us to manage any number of funds, and for clients who have significant unrealized capital gains in investments they transfer to us, we do exactly that. While indeed (based on long-term historical data), there are allocations that have higher expected returns than the core mutual funds; those higher expected returns come at a price of higher risk (in the form of higher volatility or divergence from the returns of the market or both). Aside from diversification, there are no free lunches in investing. The bottom line is that investors should not conflate the issues of simplicity versus complexity and the expected returns of portfolios. At Clarity Capital Advisors, we prefer the core funds because they cover entire markets in an effective and efficient manner.
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. Learn more about our core (total market) mutual fund providers Dimensional Fund Advisors and Vanguard.
How Much Investment Risk Should You Take?
Our Investment Risk Assessment will match you to an asset allocation of diversified investments. 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 industryfor Dimensional mutual funds.
The trading cost to purchase one of our low-cost, tax-efficient 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.