A Good Investment Strategy is One Rooted in Process and Framework
Fortis capital utilizes three investment strategies: Smart Beta, Active, and Robo. These strategies are each tailored to suit clients in a personalized manner and ensure they are invested in a strategy that aligns with their unique goals and circumstances.
Smart Beta is a form of passive investing that seeks to use intelligent overlays to improve returns over time. The general idea around passive investing is that it is very difficult to beat the market. This is justified by the fact that on average active managers (mutual funds, hedge funds, etc.) tend to under-perform the market by at least the cost of their fees.
Our Smart Beta strategy is to utilize the best ideas of passive investing while also being cognizant of the valuations underlying the various asset classes. Asset classes trading at nose-bleed valuation levels are unlikely to earn a sufficient return over an entire market cycle and therefore deserve a smaller allocation than an asset class trading below historical average valuations.
Many financial advisers allocate across different asset classes based on some inputs of age and risk tolerance relating to their client. For example they will have large cap equities, small cap equities, international equities, emerging market equities, fixed income, etc. The part they often miss though is price.
Our goal is to overlay our valuation skill-set on passive funds that allow us to make more optimal risk/reward determinations, even within a passive investing strategy
In order for active management to make sense we have to understand where we have an edge and only invest in those areas or circumstances. The way we gain this edge is by utilizing our structural advantages, which include:
- Focusing on companies the big boys can't
- Taking advantage of forced selling
- Diving into complex accounting
- Holding cash for opportunities
Managing risk is also a vital aspect to successful active management.
We have the following guidelines for managing risk:
- Only invest in companies we understand
- Demand a margin of safety before investing
- Be comfortable holding cash when nothing meets our criteria
- If a stock drops more than 10% from where we bought, we re-evaluate our thesis to make sure there is nothing we missed
Note: Risk = permanent loss of capital due to incorrect analysis. We DO NOT view volatility as risk. Volatility creates opportunity.
For some investors convenient, technology based solutions to investing are the most appropriate answers to their needs. In order to accommodate these individuals Fortis has launched a robo-based automated investing strategy.
This strategy is a low-cost, passive investment strategy comprised of ETFs and centered around providing proper asset class allocations depending on and individual's age profile and risk appetite. This strategy may not be appropriate for all investors, but it often suits those who are just getting started on their path to saving for retirement.