Investment Process:
The Oracle Process
Step 1: Assessment – Assess Your Goals
Our work begins with a thorough review of your financial goals and your current investment portfolio. Some clients come to us with a complete financial plan, which we use as a starting point for our investment management process. For clients who have not yet developed a financial plan, we offer fee-based financial planning services if desired. In either case, we meet with you to thoroughly understand your financial goals, and especially their impact on your cash flow and investment requirements. Our assessment continues with a thorough review of your current portfolio of investments.
Step 2: Strategy – Design Your Personal Investment Philosophy
We believe that a disciplined approach to investing helps to prevent many of the disappointments that arise when investors try to chase trends or time markets. A thoughtful personal investment philosophy helps provide a long-term perspective with clear criteria to guide your decisions.
Step 3: Implementation – Implement the Portfolio
We are an independent company that puts our clients’ interests first. We do not use proprietary products or products with hidden fees or expenses. We believe that advisors may have conflicts when their firm offers proprietary products. Our implementation plan reflects your personal investment philosophy and uses products that we believe carefully match each recommended asset allocation category and are appropriate for your portfolio size.
Step 4: Management – Monitor, Manage and Report
We recognize that your time is a precious resource. We continually review each manager’s portfolio and performance on a monthly basis against our strict set of performance and qualitative criteria to look for timely indications of when a manager should be evaluated for possible replacement. In addition, we regularly review your actual portfolio allocation against your recommended targets to identify opportunities for rebalancing – which helps to reinforce the discipline of buying low and selling high.
Our Main Goal
To make sure you receive the attention and responsiveness you expect and the peace of mind you deserve.
Spending and Payout Consultation
Certain key decisions often affect the investor’s ability to withdraw money from their portfolios in retirement. We developed a model designed to assist our private clients in better understanding the ramifications of what we believe to be important investment and spending decisions. Based upon the following questions, we work with our private clients to determine an appropriate plan for their investments.
- What is my asset allocation strategy?
- Does my asset allocation strategy match my risk profile?
- How much am I able to withdraw from my portfolio each year?
We can help you formulate answers to each of these questions and reevaluate previous decisions. These decisions may have a profound influence on your ability to sustain your desired lifestyle and meet legacy goals. Our model is designed to help you better navigate these decisions.
Asset Allocation
While most investment advisors agree that asset allocation policy is the primary determinant of portfolio return, the implementation of this concept varies widely in practice. We believe that asset allocation policy requires an investor to answer a few key questions, as follows:
- What is my investment objective?
- In which asset classes should I invest?
- What is the appropriate number of asset classes to include in my portfolio?
- What percentage of my portfolio should be allocated to each asset class?
Once asset class targets are set, there are differences of opinion on whether or not there should be some tactical overlay. An investor who applies a tactical overlay adjusts targets periodically to reflect short-term or intermediate-term projections of economic activity or market behavior. Alternatively, an investor may follow a “strategic approach” in which asset allocation targets are set and not adjusted for short-term or intermediate-term market considerations.
We follow the strategic approach to asset allocation. In addition, in order to maintain a specific asset allocation strategy, Oracle implements a disciplined rebalancing policy
Product/Fund Selection
Product/Fund selection and scheme due diligence are ongoing processes at Oracle. Once an individual client’s asset allocation plan is designed, we determine which investments we believe are appropriate for their portfolio. We utilize both qualitative and quantitative analysis to determine which combination of investments we believe is optimal. A typical client’s portfolio will have a mix of active and passive investments and may have more than one fund per asset class.
As an independent firm with no proprietary products, we are free to search for solutions without the pressure to promote a certain fund or strategy. This independence of thought can be seen in the unique and unexpected ways in which our manager research process has evolved.
We believe that Oracle’s Product/Fund research process differs from the industry standard practice. We begin the process with fund families versus specific asset classes. Our goal is not to find the “hottest” scheme with the best trailing performance in a specific asset class. Rather, we attempt to find the best performing fund families by analyzing the “aggregate investor’s experience” across the entire range of funds in each fund family. In doing so, we feel that we can better assess the long-term success of investors in each fund family in total. Once we have selected specific fund families, we compare their strengths to each asset class in our clients’ portfolios.
Portfolio Rebalancing
Simply put, rebalancing is buying or selling asset classes that fall below or rise above a predefined long-term asset class target. Rebalancing assists in fostering the discipline of “buy low and sell high.” In theory, buying low and selling high seems simple but, in practice, emotions and greed often tend to dictate an investor’s actions.
Opportunities to buy (when an asset class falls below its target) are sometimes created when bad news or negative market predictions depress prices. Conversely, opportunities to sell (when an asset class rises above its target) may be created by good news and positive predictions of the future for that asset class.
In our experience, without adequate education, many investors will buy their best-performing asset classes and sell their worst-performing asset classes typically at the wrong time. If this pattern is repeated, over time the portfolio value and subsequent spending available will be less than desired. A rebalancing policy should have several components including:
- Specific targets for each asset class.
- A high-end and low-end tolerance band.
- A predetermined review frequency.A plan of action if an asset class is outside its band.
- A plan of action if an asset class is outside its band.
Our research has shown that with a disciplined rebalancing policy, you may be able to improve your performance and lower your volatility.