Our view of the market is influenced by the following fundamental worldviews:

• Human beings are fundamentally growth-seeking, ingenious, and resilient, as a consequence of which . . .
• The U.S. and world economy are ultimately resilient and biased toward growth, therefore . . .
• The stock market, which mirrors the real economy, is also biased toward growth over the long run.

We believe that, like the weather, the economy and markets are too complex and chaotic for short-term prediction. But that doesn’t mean there aren’t deep regularities that can be harnessed. These include the following:

• Stocks have higher returns than bonds over the long run.
• Small company stocks have higher returns than large company stocks.
• Stocks with lower prices relative to earnings or assets (“value” stocks) have higher returns.
• Systematic rebalancing increases returns.

In his 2004 book, The Wisdom of Crowds, James Surowiecki explored the many situations in which the collective wisdom of a group will surpass that of its smartest individual members. We believe this same wisdom of crowds manifests itself in the economy as a whole, and stock markets in particular, in the following ways:

• Stock markets do a good job of relating risk and return.
• The current price represents the consensus of all investors.
• Trying to outsmart that consensus is expensive and counterproductive.
• And there’s simply no academic evidence that anyone can do it.

This is why our investment approach is designed to harness that consensus – that wisdom of crowds – rather than trying to outsmart it.

How do we manage risk? We believe that diversifying globally, across different categories and within categories, while regularly rebalancing the portfolio’s allocation is the only truly effective way to manage risk.

Our process for creating an investment portfolio is as follows:

• Allocate the portfolio to evidence-based risk factors:
  • The Market (stocks)
  • The Size Factor (small stocks over large)
  • The Value Factor (low-priced stocks over high-priced)
• Choose institutional class mutual funds that have low fees and expenses and, where appropriate, are tax efficient
• Systematically rebalance

This is our unwavering process, and this is what we offer.