The number of mutual funds that are available for individual investors to select from has grown substantially during the past decade. Unfortunately, this growth has resulted in
a growing number of mediocre investment managers that are unable to consistently outperform passively managed indices, as evidenced from recent Standard & Poor’s
studies found here. Even those mutual funds that attain favorable performance over the short-term are oftentimes unable to sustain such outperformance over longer time periods. As a result, the task of finding a portfolio of solid mutual funds is more challenging than most individual investors would expect.
At Coulter & Justus Financial Services, we spend a lot of time researching and analyzing the mutual funds that we select for our client portfolios. Our goal is to identify those rare, talented investment managers that have consistently proven themselves in both good and bad market environments. In the section below, we briefly highlight some of the core beliefs that we like to see in the investment managers we select.
• They employ a disciplined, bottom’s up fundamental approach to how they research and analyze a company. They believe investing represents an ownership interest of a business, not a piece of paper to trade.
• They utilize a value investment philosophy and are sensitive to the price they pay for a business. They typically purchase a business only when it sells for a significant discount to their calculated intrinsic value (fair value). We believe that value investing positions our clients for the best possible combination between risk and return.
• They are patient long-term investors, not speculative short-term traders. They understand the limitations of market efficiency and how to take advantage of it for the benefit of investors.
• They are focused on risk aversion and capital preservation, always contemplating the downside scenario before investing in a company.
• They seek to invest in good businesses with attractive long-term economic characteristics and growth prospects.
• They have conviction in putting their best investment ideas in their portfolios and they do not dilute the quality of their recommendations just for the sake of diversification. They understand that in order to outperform the performance of the index, their portfolios must look different from the index.
• The size of the funds they manage is small enough so that they can flexibly enter and exit their stock positions without producing significant price volatility.
Investors should carefully consider the investment objectives, risks, charges, and expenses of mutual funds. This and other important information is contained in the prospectuses, which can be obtained from your financial professional and should be read carefully before investing.
