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At Sound View Financial Advisors, we believe that financial markets reflect economic growth over a long horizon, and that there are no short cuts to disciplined, prudent and patient investing. Here are some of the basic beliefs under which we operate:

  • Markets are efficient. We believe that financial markets are generally what we call ‘efficient’. This means that, for most investors, stock picking, active trading and market timing will not provide returns that are any better than can be achieved by holding a diversified portfolio of low cost investments.

  • Diversification achieves the best returns. What is a ‘diversified portfolio’? To us, diversification is achieved not just by holding a mix of individual stocks and bonds, but by holding a widely varied portfolio, including large and small company stocks, international stocks, domestic and international bonds of various kinds, and even some asset classes aimed solely at performing differently than either traditional stocks or bonds. In order to efficiently achieve this level of diversification, we primarily use mutual funds and exchange-traded funds. This allows us to hold large baskets of stocks and bonds across our choice of asset classes, and also to avoid the ‘non-systematic’ risk of individual companies (think about BP in the spring of 2010, for instance).

  • Pay attention to risk. We believe in adopting the lowest possible risk profile required to achieve your financial goals. The amount of acceptable risk will vary depending on the client’s risk tolerance, overall asset level and stage of life. It’s not simply the case that older people should take less risk. Often, it is clients approaching retirement with large accumulations of savings who have the most to lose from a short period of market underperformance. We use a combination of approaches beyond reducing equity positions to help clients deal with portfolio risk.

  • Minimize costs. A recent Morningstar study suggested that lower costs of mutual funds are a better predictor of performance than Morningstar’s well-respected ratings system. Minimizing embedded investment costs is important in keeping your returns competitive, especially in a low interest rate environment such as we have today. We work to keep your costs low by using index funds and ETF’s where possible, rebalancing portfolios only as often as needed, keeping portfolio turnover low, and avoiding portfolio fragmentation.

  • Aiming for strong long-term performance. Our performance goals are to achieve, over a long horizon, returns commensurate with broad market benchmarks for any given risk level. We believe that we can achieve a better batting average by consistently hitting singles than by swinging for home runs.
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