Altruist Financial Advisors LLC
Fee-Only Investment Management

Investments

 

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We Apply Academic Research to Investing and Investments

Altruist's investment recommendations usually, though not always, are in the form of no-load index mutual funds and ETFs from Dimensional Fund Advisors (DFA), Vanguard, and a few others.  For an analysis of our current favorites in each of several asset classes, click here.

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We usually recommend mutual funds/ETFs instead of individual securities due to their inherent diversification benefits.
 

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We usually advocate passively managed (e.g., "index") funds/ETFs rather than actively managed funds/ETFs:
 
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Passively managed funds/ETFs usually have lower fees.

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Passively managed funds/ETFs don't exhibit "style drift."

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Passively managed funds/ETFs tend to have lower turnover than actively managed funds/ETFs.  This allows them to have lower transaction costs and somewhat greater tax-efficiency.

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Principally due to their lower fees, passively managed funds' long-term performance must exceed that of most actively managed funds/ETFs investing in similar securities.  For more information, see Nobel-prize winner William Sharpe's excellent brief article on the subject, "The Arithmetic of Active Management."
 

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Generally, we use the following criteria to select individual mutual funds/ETFs because these criteria have been shown to have the most significant correlation with future performance:
 
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No Load.  There cannot be any sales commissions on any mutual funds we recommend.

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Passive Management (e.g., index funds) is preferred to active management.

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Low Expense Ratios.  Lower is better.  We usually recommend the fund/ETF with the lowest expense ratio in an asset class unless we have a compelling reason not to.

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Value funds should be as "valuey" as possible.  A value mutual fund/ETF should have as high as possible a "book to market" ratio (a.k.a., "book to price" ratio).  "Book to market" ratio is simply the inverse of the more often used "price to book" ratio.

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Small cap funds should be as small as possible.  The stocks in a small cap mutual fund/ETF should have as small a market capitalization as possible.

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Diversification.  More is better.  The more companies a fund/ETF invests in, the less unsystematic risk it has.  On average, investors aren't rewarded for taking unsystematic risk, so less is obviously beneficial.

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Turnover.  Less is generally better.  Lower turnover means the fund/ETF pays fewer commissions to execute trades.  It also causes the fund/ETF to be more tax-efficient.

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Tax Efficiency.  For taxable accounts, it is beneficial to minimize both dividend and capital gains distributions if possible.
 

Note that past performance isn't one of our criteria.  That is because, contrary to conventional wisdom, there is very little correlation between past performance and future performance.  This has been proven statistically with a high degree of confidence in several academic studies (see relevant academic papers here).

 

In general, picking mutual funds/ETFs on the basis of their past performance is likely to be little better (or, more likely, a little worse) than picking funds/ETFs at random.  There is a better way.  That's why we use the above criteria: they have been shown to have a correlation with future performance (i.e., they have been shown to be fairly good predictors of long-term performance).

 

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Most of our clients who are managing their investments themselves use Vanguard funds.
 

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Clients of the ALTRUIST Portfolio Management Service are typically invested in a combination of principally DFA, Vanguard, and Bridgeway funds/ETFs, among others.
 

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For a comparison of DFA and Vanguard mutual funds, along with our current recommendations in each of several asset classes, click here.
 

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There are a few other investments which we occasionally recommend when appropriate  (e.g., ETFs).  Altruist continuously monitors the investment universe for additional mutual funds/ETFs and other investments which might be prudent additions to our clients' portfolios.

This web page contains the current opinions of Eric E. Haas at the time it is written and such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo provide disclosure of Mr. Haas' opinions to prospective clients.  We believe that prospective clients are well-served by being made aware of what they are buying and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. 

No investor should invest solely on the basis of information listed here.  Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.  Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser.  If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.

 

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