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Investment Management and Consulting

INVESTMENT MANAGEMENT AND CONSULTING

Successful investing is the cornerstone of reaching your financial goals. At Broadhurst Financial, we firmly believe that a passive, disciplined and low-cost approach, using exclusive investment managers, gives our clients distinct advantage.

SCIENCE, NOT HYPE

Too many investors—and advisors—make short-term, impulsive investment decisions, with predictable results. Our customized portfolio approach is solidly grounded in Modern Portfolio Theory, the respected body of science that has stood the test of time. MPT informs the key beliefs that guide our investment approach:

Markets Work. Our core belief is that markets efficiently determine the appropriate value of stocks and bonds. This is the essence of the Efficient Markets Hypothesis: Markets assemble and evaluate information so effectively that the current price of a stock or bond is usually the best estimate of its intrinsic value. Therefore, attempting to consistently beat the average market index is usually futile—and always costly. Few professional asset managers outperform the markets in a given year, and it's impossible to identify them in advance.

Diversification Matters. Investors can reduce their potential for loss through diversification. The concept is simple: Holding only one stock in your portfolio makes you directly susceptible to its price changes. If its price plummets, so does your entire portfolio. Holding two stocks is preferable to one and, unless they both tank, the portfolio is still afloat. Now hold more than 15,000 stocks in your portfolio, and you have reduced risk significantly. The key to diversification is the age-old adage, "don't put all of your eggs in one basket."

Asset-Class Exposure Works. Investors can reduce risk by diversifying across broad asset classes. A simple example: A portfolio that holds just U.S. stocks is too risky; a portfolio composed solely of Japanese stocks is also too risky. Combining the asset classes into a 50/50 portfolio, however, results in lower risk with higher historical return. Our client portfolios incorporate between 10 and 15 asset classes to further minimize risk.

PASSIVE INVESTING

Some approach investing as a game; in fact, it's a science. And we believe the most respected science makes an indisputable case for passive investing. Efficient stock and bond markets are nearly impossible to beat, and investors are ill-served spending their resources in an attempt to do so.

In any given year, actively managed funds outperform the passive benchmarks only about 25% of the time, depending on the market sector. Over a 10-year period, the probability of outperforming the market is just 1 in 1,048,576.

Passive investing—investing based on holding investments within fixed indexes—allows patient investors to participate in the market's long-term growth. And it allows them to avoid the extra layer of costs associated with hiring "active" managers and paying for endless buy-and-sell transactions.

THE DFA ADVANTAGE

Not all passive investments are the same. Broadhurst is proud to be one of a select group of firms authorized to provide our clients with access to Dimensional Fund Advisors' highly respected passive funds.

DFA's funds are superior to typical index funds because of their proven ability to capture the pure return of specific asset classes while maintaining low costs and remaining tightly aligned with their investment objectives. DFA funds' reputation is due in part to their low costs: They are known for their low expenses, tax efficiency, minimal turnover and lack of marketing fees.

While we use DFA strategies as our primary investment solutions, we also use index funds, exchange-traded funds and alternative investments where appropriate in customizing client portfolios.

CUSTOMIZED PORTFOLIOS

At Broadhurst Financial, we custom-design portfolios with the objective of helping clients preserve their wealth and enjoy long-term growth. Tailoring our portfolios to your specific goals, risk tolerance and time horizon, we create low-cost, globally diversified portfolios built around products we believe are the best available.

And by employing a passive approach, we not only position our clients to succeed, but also free them from the compulsive need to monitor the ups and downs of the markets. The bottom line: Our clients are free to focus on the what's really important to them, secure in the knowledge that their investments are at work.

THE EXPERTS WEIGH IN ON PASSIVE INVESTING

I do not believe that they (investment advisors) can identify, in advance, the top-performing managers—no one can!—and I'd avoid those who claim they can do so. - John Bogle, Common Sense on Mutual Funds

"By periodically investing in an index fund ... the know-nothing investor can actually outperform most investment professionals." - Warren Buffet

"If index funds look great before taxes, their performance is almost unbeatable after taxes, thanks to their low turnover and thus slow realization of capital gains." - Jonathan Clements, Wall Street Journal