INVEST WITH US

If you choose to invest your money with us instead of managing it yourself, we will be happy to assist you. However, before we proceed any further, you need to understand what to expect from us and see whether our investment philosophy matches your goals.

When you become a client, we will open a brokerage account (individual, joint, IRA, trust, etc.) with Scottrade for you. The account can be funded with cash or transferred fully or partially from elsewhere. The account will be in your name, not ours, but you will give us authorization to execute trades. You will be able to access your account online and see what investments are in your portfolio. Because the account will be in your name, it will belong to you, not us. If for some reason you are dissatisfied with our services, you can remove our trading privileges.

We will invest your money mainly in common stocks. However, at times, we may also purchase other types of securities such bonds or preferred stocks. Because we want you to understand why we have purchased particular investments, we often provide you with reports on investments that we make. That way, instead of seeing unknown ticker symbols, you understand the logic behind our investment choices. In addition, it helps you see the long-term value of each investment should the current trading price drop below the purchase price.

We invest with the goal of long-term growth. Investors tend to get confused about what “long term” means. For some, it means overnight, a few days, a few months, or a few quarters. For us, “long term” means three to five years. However, this doesn’t mean that we hold all of our positions for that long. We purchase investments when we believe that they are significantly undervalued. If the market corrects its mispricing within a day or a month, we will sell, because holding fairly priced investments is not in your best interest. We can usually invest the money in other undervalued securities. At the end of each quarter, we charge you a management fee that is based on the value of your portfolio at the end of the quarter. You do not have to write us a check because our fee is automatically subtracted from your account. The fee amount depends on the assets under management, and it does not include the trading commission that Scottrade charges every time we buy or sell your positions.

Now that you have a clearer picture of what to expect from us, it is important to us that you understand our investment philosophy, and share our values, goals, and objectives. Because we are long-term investors, our investment strategies are best suited for clients with an investment horizon of three to five years or longer. If you expect to make an unrealistic amount of money in less than 6 to 12 months, we would rather not invest your money because we truly have no idea what our performance will be within this short period of time. From our experience, in order to be successful, investors must be willing to take short-term pain in order to achieve long-term gains. More often than not, when we make a purchase, the price decreases before it increases.

Because we focus on serving the long-term investor, who is in the minority, this on its own creates a competitive advantage over our competitors. Most professional managers are at a huge disadvantage because of their clients’ expectations. Most professional money managers cannot afford to invest in opportunities that are likely to go down in price because once they are down 10%, many clients panic and withdraw their money. Even if the manager thinks that a security is significantly underpriced, he or she will not buy it if there is a chance that the price will go down. We, on the other hand, often buy securities that other managers have avoided purchasing because they fear temporary price declines. When we do this, competition from other bidders is limited and, and, as a result, we are able to get good prices. However, good prices do not mean that these securities will not go down in price anymore. In order for us to be able to commit to our investment philosophy, our clients must be able to tolerate short-term declines even when they happen over many months. While these declines may or may not happen, it is always a possibility because in the short term, markets can be very unreasonable. We cannot ever pinpoint a bottom, and we don’t think anyone else can despite what they may say. If you know that you cannot tolerate volatility, then you should not be investing with us.

If you feel comfortable with how we manage money and you understand our investment philosophy, then we would be happy to speak with you about investing with us. We are very optimistic about the future, but the key is to have the right expectations and to be patient, which is not easy to do.