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ABOUT OUR FIRM,SwaimBrown is an,independent fee only. investment advisor, Our focus is on wealth management We believe over time while avoiding the numerous risks that. success in properly managing client assets is not abound in today s investment environment. measured by performance statistics but by our, clients success in achieving their goals We are successful because we understand the. unique needs of our clients and because we are, We believe that successful wealth management is ideally positioned to respond to those needs. about understanding and managing risk Instead As an independent fee based firm we do not. of chasing hot funds and betting on hot markets represent investment or insurance providers nor. we focus on developing a disciplined investment do we receive commissions for recommending. strategy that will provide our clients the investment investments or trading securities. returns they need with the least risk possible to, their assets We answer only to our clients ensuring that the.
investments we recommend to them are those that, Our clients are not speculative high risk investors we believe to be appropriate for them. Some are fiduciaries of corporate retirement plans. non profit institutions trusts or estates Others Our reality is a simple one. are individuals who have already established We succeed only when our. themselves financially All seek to grow their assets clients succeed. INVESTMENT,PHILOSOPHY,Investment Philosophy,Three key concepts for. investment success, Our investment philosophy can be summed up in a They are embraced by some of the largest. single phrase Focus on the things you can control institutional investors in the world foundations. not the things you can t control pension funds and endowments who all are charged. with managing their money as prudently and, All too often investment managers devote their effectively as possible These institutional investors. efforts to trying to outguess the market where it s don t play Wall Street s game and we don t think our. heading and where to be or not be in the future clients should either. While this may sound appealing study after study, has found that this approach known as active Here is a look at our Three Key.
management is futile and costly In fact statistics Concepts in more detail. show that more than 80 of active managers fail to, beat their market benchmark over five and ten year Concept One. time periods What s more the slim percentage of Maximize Cost Efficiency. managers who do beat the market never show any If you could increase your net investment return. predictable tendency to repeat the feat in the future without increasing your risk would you want to do. it appears that luck has as much to do with beating that Obviously you would and yet most investors. the market as does skill And managers who guess and their advisors fail to focus on some very simple. wrong about the direction of the market run the risk strategies that can significantly improve the cost. of missing out on returns that were otherwise there to efficiency of the investment portfolio thereby. be had for their clients increasing net returns in the process. In our opinion that is no basis for an investment 1 Use institutional. philosophy and for that reason we reject the asset class funds. costly and ineffective games that Wall Street Institutional asset class funds are low cost style. encourages investors to play While we can t know specific investments designed to capture the risk and. the future direction of the market and can t control return characteristics of a specific market segment. which market sectors will or won t be in favor we These funds track their targeted asset class with great. can devote ourselves to certain key concepts that precision and with much lower cost than most retail. are within our control and that have been proven mutual funds Such funds are available only to large. to have a significant positive effect on investment institutional investors and a limited number of. performance independent Registered Investment Advisors. including us, We call these our Three Key Concepts for Investment. Success These concepts are grounded in logic,reason and commonsense. Investment Philosophy,Four major attributes of asset class Concept Two. funds make them attractive Minimize Unnecessary Volatility. 1 Lower operating expenses If you have two investment portfolios with the same. 2 Lower turnover resulting in lower costs average arithmetic return over time you would. 3 Lower turnover resulting in lower taxes probably expect them to generate the same ending. 4 Consistently maintained market segments wealth value But there is an important additional part. of the equation A portfolio that has lower volatility will. 2 Focus on asset location actually generate a higher compound return over time. Many investors have heard of asset allocation but few than a portfolio with greater volatility see Exhibit 1. are familiar with the concept of asset location which. is the strategic division of assets across an investor s Obviously then you want to design your portfolio so. accounts based on those assets tax liability that it has as little volatility as necessary to achieve. your goals This is an important concept but one that. Proper asset location is extremely important in few advisors devote time to understanding. maximizing the investor s net return several studies. have shown investors can lose up to 20 of their While all stock investors have to live with a certain. after tax return by mis locating investments in the amount of volatility the goal should be to structure. wrong type of account And yet a recent Federal your portfolio so that it doesn t experience. Reserve survey showed most investors populate taxable unnecessary volatility While there are many ideas. and tax deferred accounts with identical securities about the best way to accomplish this goal only one. asset allocation strategy has won a Nobel Prize in. Under the current tax code capital gains and income Economic Science for its efforts in this area Modern. are taxed at different rates Because the sources of Portfolio Theory MPT. return for investments vary capital gains dividends. and income it is advantageous to place tax efficient According to MPT asset classes and investment styles. investments in taxable accounts and tax inefficient such as growth and value large and small foreign. investments in taxdeferred accounts to the greatest and domestic etc should be combined in a portfolio. extent possible with an understanding of the effect those asset classes. have on each other not just evaluated on their own. By placing high income investments in a taxdeferred For example large U S growth stocks and REIT real. account investors can shelter that income from taxes estate stocks each have a high degree of volatility on. Meanwhile low income low turnover investments their own but when they are combined in a portfolio. such as large cap stock funds can be placed in taxable they actually help reduce the portfolio s volatility This. accounts due to their greater tax efficiency is because those two asset classes historically have. a low correlation relative to one another when large. Proper asset location can help many investors growth stocks are in favor REIT stocks tend to be out. increase their after tax return without assuming of favor and vice versa. additional risk and this is a major focus of our, portfolio management efforts Today MPT is the gold standard for prudent invest.
ment management whether for large institutional, investors or individuals In fact it was the explicit. Investment Philosophy, underpinning of the Uniform Prudent Investors there are times such as 2002 and 2008 when. Act which sets the guidelines for prudent fiduciary nearly every equity asset class declines and there is. conduct in most states While nearly everyone in the no short term benefit to be had from diversification. investment industry today touts the virtues of diver What MPT does accomplish over the long term is to. sification the measure of that commitment is wheth reduce the extreme volatility that comes from being. er the investment professional is truly adhering to the concentrated in just a few stocks or market sectors. principles of Modern Portfolio Theory something that will increase your compound returns. over time compared to less efficiently designed, To be sure MPT does not give us a free pass around portfolios. the volatility that is an inherent part of stock investing. LESS VOLATILITY GREATER WEALTH, Year Rate of Return Ending Value Rate of Return Ending Value. 1 8 108 000 30 130 000,2 8 116 640 20 104 000,3 8 125 971 25 130 000.
4 8 136 049 20 104 000,5 8 146 933 25 130 000,Arithmetic return 8 8. Compound return 8 5 39,Source CEG Worldwide, Concept Three of the portfolio to deliver a more consistent and. Manage the Portfolio Proactively predictable investment experience. We embrace the concept of buy and hold but we, definitely do not embrace the concept of buy and Reallocation The capital markets are a dynamic. forget about it While we avoid making subjective environment Things do not stay static countries. decisions about the near term direction of the stock thrive or fall into decline enterprises come and go. market we go to great lengths to manage your and entire industries are created or made obsolete. portfolio and monitor the investments within it Our in short order As such we monitor the global. efforts in this area include capital markets to see if new asset classes are. emerging that may add a diversification benefit to. Rebalancing Rebalancing is the process of our portfolio strategies We conduct rigorous. reallocating assets back to their predetermined analyses of new asset class opportunities and. target weightings Over time as segments of the when appropriate we add them to our portfolio. portfolio perform differently the portfolio s asset strategies if we believe they make sense for our. allocation will change causing a deviation in its investors We do not make such decisions based. expected risk and return The primary purpose of on market conditions as we believe such decision. rebalancing is to maintain the structural integrity making is flawed rather we choose to add new. Investment Philosophy, asset classes to our portfolio strategies when we our investors such as Exchange Traded Funds and. believe there is along term diversification benefit Inflation Adjusted Bonds commonly known as. for doing so TIPS Other times asset class funds come to. market that may track a particular asset class at a. Investment Evaluation lower cost than a fund we are currently using in. New investments are constantly coming to market our portfolio strategies. much like new food products are constantly, popping up on supermarket shelves As Vanguard We constantly evaluate new investment vehicles.
founder John Bogle noted most of these to determine if they will help our investors achieve. investment products serve the interests of the their goals with lower volatility or less cost than. investment provider not the investor However the current investments in our portfolios. sometimes new investment vehicles come to,market that do provide a compelling benefit to. Investment Philosophy,At SwaimBrown we are committed to. providing our clients with an unsurpassed,level of service and advice. To help us accomplish this vision we partner with together to craft an investment plan custom tailored. Capital Directions LLC one of the Southeast s oldest to each client s unique needs goals and values. and largest investment managers to provide, portfolio management services for our clients Accessing institutional investments Capital. Founded in 1985 Capital Directions manages and Directions is one of a limited number of advisors. advises on more than 1 2 billion much of it through around the country who are approved to use the. selective affiliations with independent investment institutional asset class funds of Dimensional Fund. advisors like us Advisors DFA DFA funds are among the most. highly regarded in the investment industry thanks to. There are several key advantages that our their extremely low cost structure and outstanding. partnership with CD provides our clients tax efficiency Investors wishing to go directly to DFA. Outstanding service Capital Directions must have a minimum of 2 million per fund Thanks. performs many of the mechanical aspects of to our affiliation with Capital Directions however we. investment management for our clients trading are pleased to offer our clients access to DFA funds. portfolio construction processing distributions at greatly reduced minimums. producing performance reports etc This frees,us from these time consuming tasks allowing.
us to devote much more of our energy to being,responsive to our clients high level planning. Investment Strategies,needs and providing investment solutions that. meet those needs,The model portfolios on the following pages. Expanding our brain trust Because no one represent the investment strategies employed. can be an expert in everything we believe by Capital Directions since their commencement. that professional collaboration is essential to date of January 1999 All of the performance. providing superior service to our clients Our,data contained on the following pages is. Maximize Cost Efficiency If y ouc ld increase your net investment return w ith ouncreasing y r sk would you want to d that Obviou sly you would and yet most inve tors and th eir advisors fail t of cus on so mv ry si ple s tr ae g i that can nfic ly mprove the cost effi ci ny of the inves m portfolio thereby in cr easing net retu s the pro 1 Use institutional asset class funds

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