Prudence Reigns

The Mirriam-Webster Dictionary defines prudent as “marked by wisdom or judiciousness.” Further, judiciousness is defined as “having, exercising or characterized by sound judgment.” In a world of uncertainty, when stock markets can rise by three percent in a day and fall by three percent the next day, prudence reigns.

What does being prudent mean to us as investment managers? The simple answer is the old adage that mom used to say: don’t put all your eggs in one basket. But, with so much complexity in the financial markets and so many different instruments available, which baskets do you choose?

We use a company called Litman Gregory to help us answer that question. They do a fantastic job of filtering out the noise coming from Wall Street and Washington. Their philosophy is very similar to ours: capture as much return potential as possible for clients while making sure to limit the potential for loss during downturns.

So, they analyze the different opportunities available, from stocks to bonds, international to domestic, traditional and non-traditional. Using different combinations, they determine the best risk-reward scenarios and plug them into conservative, moderate and aggressive portfolios.

We then use these recommendations to build our socially and environmentally responsible portfolios. Using mutual funds that we have researched based on performance, social & environmental responsibility, an other important criteria, we offer our Core Conservative, Core Balanced and Core Aggressive portfolios.

So, from a prudence perspective, how has this benefitted clients? Year to date (9/12/2011) our Core Balanced Portfolio is down 4.5%. The S&P 500 by comparison is down about 8.6%.

We have a fiduciary duty to act only in our clients’ best interest. Our philosophy states that we are willing to underperform in the short-term to cushion losses and market volatility. This usually results in long-term outperformance of the markets – something that’s important to our clients.


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