The Ferguson-Johnson investment philosophy is grounded in the following six principles.
Our investment approach begins with the belief that markets are efficient. This belief is supported by decades of academic and financial research, which have held up to rigorous challenges. An efficient market means millions of investors are competing to find the most attractive returns. This competition drives prices to a fair market value, where no one is able to achieve superior returns without taking on additional levels of risk. Balancing these risks for you is a large part of our job as your fee-only investment advisor.
Any given security or asset class can move sharply upward or downward in an unpredictable pattern, exposing an investor to extreme risk. In order to mitigate this, we invest broadly across multiple asset classes including equities (stocks), fixed-income (bonds), and cash equivalents (money market instruments). Our investment approach aims to diversify a portfolio away from luck-driven risks and toward broader economic forces. Your portfolio will have access to the thousands of investment solutions available through our custodial relationship with Fidelity Investments.
Long Term Investments/Discipline
Discipline is crucial for successful wealth building. Many individuals fall into traps while managing their investments by abandoning or altering strategies due to faulty logic, fear, or even optimism. Our investment philosophy is grounded in the belief that over the long-term, the disciplined investor will come out ahead of the investor who reacts to hunches and headlines. We provide you with a strategy to be successful in the long-term and the discipline to execute that strategy.
Failure of Investment Management
Numerous studies have shown that, on average, active investment management strategies underperform the market. Active mutual funds attempt to “beat” markets through timing and speculation, often acting in direct opposition to the ideas of market efficiency, global diversification, and a long-term investing approach. In contrast, our academic, engineered-indexing approach to portfolio management targets specific, identifiable dimensions of risk and return based on the principles of efficient markets, diversification, and long-term returns. Our strategies often employ the use of Dimensional Funds that are unavailable to the individual investor.
Minimize Transaction Costs
Active investment management encourages frequent portfolio turnover and repositioning, often resulting in onerous transaction costs. Our approach drastically reduces transaction costs generated from portfolio cycling and employs low-fee mutual funds that clock-in significantly below industry averages.
Tax Investment Strategies
You may require tax-sensitive investment strategies. Your tax-managed strategies will follow our same investment philosophy while giving particular attention to after-tax returns. You will employ logistical tax-efficiency across accounts in order to minimize tax burden and plan taxable events at advantageous times. This includes tax loss harvesting, which involves not market speculation, but taking advantage of IRS regulations.
To receive your complimentary copy of The Investment Answer: Learn to Manage Your Money and Protect Your Financial Future by Daniel C. Goldie and Gordon S. Murray, please call us at (301) 284-8786.
Learn more about Ferguson-Johnson’s investment philosophy by contacting us.