TWRU’s Equity Investment Philosophy is based on Nobel Prize winning research rooted in academia. These beliefs include:

Diversification reduces risk: Harry Markowitz won the Nobel Prize in Economics in 1990 for his groundbreaking research on portfolio risk/reward. Assets with dissimilar price movements yield true diversification, thus minimizing portfolio volatility and increasing compound returns.

Markets are efficient: The price of a stock is usually the best estimate of its intrinsic value, as the knowledge and expectations of all investors are factored into the price instantly.

Asset Allocation is key determinate of portfolio returns: Asset allocation is how your assets are divided amongst equities, fixed income, and cash. The goal is to determine the optimal mix to yield the best return per unit of risk taken.

Passive Management of portfolios is superior to active management: The overwhelming majority of the time, active managers (whose goal is to beat the market by stock selection and market timing) actually fail to even match their respective targets and often underperform them, usually incurring greater fees for their underperformance!

Asset Class investing is superior to Indexing: Indexes are not the best representation of asset classes; they are in fact commercial benchmarks. Greater flexibility with portfolios, a trading methodology more suited for long term investors, and more accurate reflections of the true asset classes help enhance the premiums earned for small-cap and value investing. This is accomplished by investing in asset-class funds which do not ignore less liquid holdings.

There exists a “size effect” and “value effect” in equities: The stock market is a “risk/reward” or “cost of capital” story, in which for every degree of risk taken there should be a reward. Thus, long term rates of return indicate that smaller companies and value companies (temporarily distressed companies) should earn investors premiums.

Fee-Only is superior to Commission or Fee-Based: Commission-based brokers are limited to only those investments that earn them commissions and/or 12b-1 fees; fee-based advisors take not only commissions and 12b-1 fees, but also a fee! As a fee-ONLY advisor, there is full disclosure of fees and complete transparency as to the total cost of receiving unbiased asset management. Our goal as a fee-only advisor is to minimize costs, deliver sound advice, and develop a suitable long term investment policy.