 | |  | |  | |  | |  | |  | |  |
| (c) 2009 Cathy Pareto & Associates, Inc. All rights reserved |
The right to download, store and/or output any material on this Web site is granted for viewing use only. Use or viewing of this site acknowledges that you have
read, understand and will abide by our terms of use, legal notices, and disclaimers.
read, understand and will abide by our terms of use, legal notices, and disclaimers.
Not All Advisors Are Created Equal
Sales recommendations do not constitute financial advice. Some advisors
make recommendations to sell investment and insurance products merely to
make a commission. But, ongoing advice helps investors achieve
their financial goals. This requires a prudent and well thought out strategy
that should be monitored and modified as needed, a process that should not
be driven by sales products.
Investment Philosophy
Successful portfolios are based on research and reasonable expectations,
not intuition. Illogical investors attempt to guess which manager, stock or
asset class will have tomorrow’s best performance. That’s why so many
have consistently failed. Successful, rational investors excel because of a
clear methodology and, of course, discipline
What type of investor are you? What type of investor do you want to be?
For the past fifty years, modern finance has been exploring the most efficient
methods of achieving global market returns. The findings have been a boon
for individual investors who have put forth the effort to learn about them. We
strive to achieve principal preservation, capital enhancement and inflation
protection for our client portfolios.
Diversification
A successful investor is able to benefit from the types of risks that capture
expected returns and diversifies away the uncompensated risks. Exposing
yourself to too few stocks or limiting your portfolio to specific countries or
sectors can threaten your portfolio. Broad diversification across thousands of
different companies, in different countries and industries is your best
defense. The greater the amount of securities, the safer your outcome.
Allocation and Structure
A group of securities that exhibit similar characteristics or behave similarly in
the marketplace is commonly referred to as an asset class. There are several
asset classes represented in the global markets, for example small stocks,
international stocks, bonds, real estate, domestic large stocks, etc., to name
a few. Each of these asset classes demonstrate average price movements
that are distinct from one another. Investors can benefit by combining the
different asset classes in a structured portfolio. In this case, the portfolio as a
whole is more valuable than its underlying parts. The end result is usually a
higher expected return and a lower level of risk.
Management Strategy
Structuring a portfolio around the ability to get paid for specific equity risk
factors renders individual stock selection useless. Rather than analyzing
individual stocks, investing it simplified down to the decision of how much
stock to hold versus bonds, and how small or large, and value- or growth-
tilted the stocks should be.
Most fund managers focus on the ongoing trading of individual securities
while index fund managers while index fund managers simply hold the exact
securities found in its appropriate index. Index mutual funds and exchange
traded funds offer lower transaction costs, minimal asset class drift, and
greater tax efficiency. Passively structured funds, however, endorse the idea
of an efficient market, but are not held captive to the exact breakdown of a
relative index. Instead, the funds can structure strategies based on scientific
evidence rather than on speculation or commercial indexes. For example,
small cap strategies can target smaller stocks more consistently while value
strategies can target value returns with greater focus.
Portfolio Engineering
A pioneering study by renowned academics, Eugene Fama and Ken French,
suggests that three risk factors: market, size and price dimensions explain
96% of historical equity performance. This model explains the fact that two
particular types of stocks outperform markets on a regular basis: value and
small-caps. While portfolios with exposure to small and value may have
different risks than the market as a whole, they are not necessarily higher.
Deciding on the degree that your portfolio should participate in the three risk
factors is the challenge for the investor. Exposure to small and value will help
you reach above global market returns, but portfolio risk must be tempered by
adding other assets with low correlations.
Tax Sensitivity
Taxes represent a significant consideration for every long-term investor. By
minimizing income taxes, investors retain more wealth to help meet their
goals. We exercise care in the appropriate placement of investments within
taxable and tax-deferred accounts. For example, we generally place the most
tax friendly and tax-managed vehicles in taxable accounts and higher turnover
mutual funds in tax-deferred accounts. However, tax considerations do not
dominate our portfolio management process.
The Risk Factor
Investors get paid for accepting market risks, that’s true. But taking calculated
risks is a far more effective way to achieve your desired returns. Risk is a real
threat to wealth accumulation. Investors that hold concentrated portfolios are
bearing far more risk than justified by the expected return. Concentrated
issues include individual stocks, industry, sector and geographic
concentrations. There is no separately priced risk element for any of these
concentration issues, and no additional return to be anticipated by bearing
these risks. Our primary goal as your Advisor would be to maximize your
expected return, however, it must be commensurate with the specific risk you
are willing to accept.
Sales recommendations do not constitute financial advice. Some advisors
make recommendations to sell investment and insurance products merely to
make a commission. But, ongoing advice helps investors achieve
their financial goals. This requires a prudent and well thought out strategy
that should be monitored and modified as needed, a process that should not
be driven by sales products.
Investment Philosophy
Successful portfolios are based on research and reasonable expectations,
not intuition. Illogical investors attempt to guess which manager, stock or
asset class will have tomorrow’s best performance. That’s why so many
have consistently failed. Successful, rational investors excel because of a
clear methodology and, of course, discipline
What type of investor are you? What type of investor do you want to be?
For the past fifty years, modern finance has been exploring the most efficient
methods of achieving global market returns. The findings have been a boon
for individual investors who have put forth the effort to learn about them. We
strive to achieve principal preservation, capital enhancement and inflation
protection for our client portfolios.
Diversification
A successful investor is able to benefit from the types of risks that capture
expected returns and diversifies away the uncompensated risks. Exposing
yourself to too few stocks or limiting your portfolio to specific countries or
sectors can threaten your portfolio. Broad diversification across thousands of
different companies, in different countries and industries is your best
defense. The greater the amount of securities, the safer your outcome.
Allocation and Structure
A group of securities that exhibit similar characteristics or behave similarly in
the marketplace is commonly referred to as an asset class. There are several
asset classes represented in the global markets, for example small stocks,
international stocks, bonds, real estate, domestic large stocks, etc., to name
a few. Each of these asset classes demonstrate average price movements
that are distinct from one another. Investors can benefit by combining the
different asset classes in a structured portfolio. In this case, the portfolio as a
whole is more valuable than its underlying parts. The end result is usually a
higher expected return and a lower level of risk.
Management Strategy
Structuring a portfolio around the ability to get paid for specific equity risk
factors renders individual stock selection useless. Rather than analyzing
individual stocks, investing it simplified down to the decision of how much
stock to hold versus bonds, and how small or large, and value- or growth-
tilted the stocks should be.
Most fund managers focus on the ongoing trading of individual securities
while index fund managers while index fund managers simply hold the exact
securities found in its appropriate index. Index mutual funds and exchange
traded funds offer lower transaction costs, minimal asset class drift, and
greater tax efficiency. Passively structured funds, however, endorse the idea
of an efficient market, but are not held captive to the exact breakdown of a
relative index. Instead, the funds can structure strategies based on scientific
evidence rather than on speculation or commercial indexes. For example,
small cap strategies can target smaller stocks more consistently while value
strategies can target value returns with greater focus.
Portfolio Engineering
A pioneering study by renowned academics, Eugene Fama and Ken French,
suggests that three risk factors: market, size and price dimensions explain
96% of historical equity performance. This model explains the fact that two
particular types of stocks outperform markets on a regular basis: value and
small-caps. While portfolios with exposure to small and value may have
different risks than the market as a whole, they are not necessarily higher.
Deciding on the degree that your portfolio should participate in the three risk
factors is the challenge for the investor. Exposure to small and value will help
you reach above global market returns, but portfolio risk must be tempered by
adding other assets with low correlations.
Tax Sensitivity
Taxes represent a significant consideration for every long-term investor. By
minimizing income taxes, investors retain more wealth to help meet their
goals. We exercise care in the appropriate placement of investments within
taxable and tax-deferred accounts. For example, we generally place the most
tax friendly and tax-managed vehicles in taxable accounts and higher turnover
mutual funds in tax-deferred accounts. However, tax considerations do not
dominate our portfolio management process.
The Risk Factor
Investors get paid for accepting market risks, that’s true. But taking calculated
risks is a far more effective way to achieve your desired returns. Risk is a real
threat to wealth accumulation. Investors that hold concentrated portfolios are
bearing far more risk than justified by the expected return. Concentrated
issues include individual stocks, industry, sector and geographic
concentrations. There is no separately priced risk element for any of these
concentration issues, and no additional return to be anticipated by bearing
these risks. Our primary goal as your Advisor would be to maximize your
expected return, however, it must be commensurate with the specific risk you
are willing to accept.
| Investment Management and Financial Planning |
 |  |  |
Your Personal Financial
Helpline
We do more than just create financial plans or
invest your assets, we help you make better
financial decisions. When you have questions
related to insurance needs, buying versus
leasing, saving, buying a home, investing,
retirement or other, you can call us. We serve as
your sounding board to help you make informed
decisions that will impact your financial future.
That's what makes our Advisors different. It's like
having your own personal financial helpline.
We want to be there for you every step of the way
to help you navigate the often complex life
changes that will affect your financial future.
Experience The Difference
When you work with Cathy Pareto and Associates
you will experience the difference it makes to have
a knowledgeable Advisor who is truly your
financial partner. We not only help you with your
investments, we help you stay on target so you
can live your life with peace of mind.
Wealth Building Strategies
Newsletter
Sign up for our free electronic newsletter to
receive current articles on financial planning and
investing. Click here to sign up today.
Helpline
We do more than just create financial plans or
invest your assets, we help you make better
financial decisions. When you have questions
related to insurance needs, buying versus
leasing, saving, buying a home, investing,
retirement or other, you can call us. We serve as
your sounding board to help you make informed
decisions that will impact your financial future.
That's what makes our Advisors different. It's like
having your own personal financial helpline.
We want to be there for you every step of the way
to help you navigate the often complex life
changes that will affect your financial future.
Experience The Difference
When you work with Cathy Pareto and Associates
you will experience the difference it makes to have
a knowledgeable Advisor who is truly your
financial partner. We not only help you with your
investments, we help you stay on target so you
can live your life with peace of mind.
Wealth Building Strategies
Newsletter
Sign up for our free electronic newsletter to
receive current articles on financial planning and
investing. Click here to sign up today.
Let's Talk
We invite you to schedule a meeting with us
for a complimentary review of your financial
situation. Call us today at 305-728-7234 or fill
out our contact form so we can call you.
We invite you to schedule a meeting with us
for a complimentary review of your financial
situation. Call us today at 305-728-7234 or fill
out our contact form so we can call you.
