Portfolio Management

If you'd like to read more detail on Abacus' investment philosophy, please download our Asset Class Investing document, or see our Papers section for works published by other authors.

PEACE OF MIND. We give our clients peace of mind. Our investment strategies are supported by unbiased academic research, not Wall Street hype. We are very focused on reducing portfolio volatility and risk while providing ample growth for our clients to reach their most important goals. While we won't promise to double your money in one year, our strategies allow our clients to sleep well at night.

EXCLUSIVE INVESTMENT VEHICLES. Abacus clients have access to investment vehicles unavailable to the retail investor. These include low-cost institutional investment managers, fixed income investments that anchor the portfolio while providing better-than-the-bank returns, and not-available-to-the-public alternative investments that significantly reduce overall portfolio volatility.

PASSIVE INVESTING. Like many of the largest investors in the country, Abacus does not utilize strategies that attempt to pick stocks within a particular asset class. The impartial academic research overwhelmingly supports the thesis that most managers who pick stocks subjectively under-perform their market benchmarks. Of course, there are always a few stock-picking managers who do beat the market, but identifying them ahead of time is close to impossible, according to most academic literature. Abacus also does not employ market timing. Working closely with our clients, we develop an investment plan that is adhered to with uncommon discipline.

COSTS. We keep annual investment expenses low. As an institutional investment firm we can buy discounted institutional (limited access) no-load mutual funds and invest with separate account managers. Their lower fees add at least ¼-½% per year of additional investment growth. In addition, the funds and managers we use have much lower-than-average transactions costs, something you won't find disclosed in a mutual fund prospectus. This can add an additional ½% or more in investment growth. See our Fees for Financial Services handout for more detail about investment costs.

DIVERSIFICATION. We diversify investment portfolios over 8-10 different asset categories. Over the past 30 years a similarly diversified portfolio produced, on average, 2% - 4% per year of additional investment growth versus solely investing in U.S. large cap stocks, as most money managers, trust companies, and stockbrokers do. Allocating money to different equity classes both increases the annual return and lowers volatility. Many financial advisors attempt to pick the asset category they believe will perform the best each year, and put most of their eggs in that basket. But no study has shown that anyone has been able to do this successfully over time.

ASSET CLASS SELECTION. We remain committed to two sectors that many professional managers have forgotten: Small Cap and low Price to Earnings (P/E) Ratio companies. Since 1927, small cap equities have produced an annual return over 3% higher than large cap equities. Also since 1927, value stocks have produced an annual return over 4% higher than growth stocks¹.

REBALANCING. We aim to buy low and sell high. While this sounds like common sense, very few investors or money managers actually do this in as disciplined a way as Abacus. Most investors sell after a stock (or mutual fund) has fallen significantly and buy only when it hits a new high. We rebalance client portfolios periodically, which prompts us to sell asset classes at higher prices and buy other asset classes at lower prices.

TAXES. We keep taxes low on investment assets. Study after study has shown that people who buy and hold assets and minimize turnover do better than those who actively trade and have high turnover. Compared with the average mutual fund which pays out about half of its capital gains annually, a tax-managed fund can be expected to yield an investor in the top tax bracket an additional $168,880 on an initial $100,000 investment over a 20 year period². This is equivalent to earning a 10% versus an 8.5% compounded annual return.

SOCIALLY RESPONSIBLE INVESTING. We can build socially responsible portfolios. For clients who wish to see their investments in more alignment with their values, we have access to tremendous funds that employ social screening and are expected to perform comparably to non-socially responsible funds with similar objectives and structure. In addition, we apply all of the other principles on this list to our socially-screened portfolios, helping to control portfolio volatility, taxes, and costs. Most SRI advisors do not execute these important wealth management strategies to Abacus Wealth Partner's standards.

CONSOLIDATED REPORTING. We provide consolidated reporting of all client financial assets. We do not take custody of any client assets. Many are held at a large national discount broker such as Charles Schwab Institutional, TD Waterhouse, or Trust Company of America, although we have clients with assets at many other institutions. Rather than receiving monthly statements from multiple firms, our clients receive a concise quarterly report that shows them all of their assets in one place.

REAL ESTATE & NON-STANDARD ASSETS. We don't limit our advice to stocks and bonds. We advise our clients on every type of financial asset including investment real estate, private trust deeds, limited partnerships, annuities, whole life insurance policies, stock options, personal residences, second homes, art collections, automobiles, boats, airplanes, and privately held businesses.

CONCENTRATED STOCK & OPTIONS. We reduce our clients' exposures to concentrated stock positions. If you hold employee stock options or a concentrated position in one or more stocks, we can help reduce your risk, defer taxes, and provide your portfolio with liquidity through the use of options, forward contracts, and cashless collars. We manage stock option portfolios, monitoring them on a quarterly basis and advising our clients on exercises, sales, or reloads.