Asset Management: we tailor your investments for High Stability

Client meeting How Do We Help You?

Baron Financial Group is a team of trusted advisors that responsibly manages money and provides customized solutions for your unique needs. Our investment philosophy is to provide stable wealth growth and protection, guided by your financial goals and tolerance for risk, within the parameters of your time horizon and tax circumstances.

Your goals and needs are at the forefront of any investment plan

At the Baron Financial Group, portfolios are designed to meet your financial goals. Our High Stability Wealth Management approach is based on Nobel Prize winning investing principles. The mix of stocks, bonds, cash and other asset classes is perhaps the most important factor in determining the overall return and risk of a portfolio. Our goal is to preserve your assets and to grow those assets responsibly. The best way to accomplish this goal is to build a diversified portfolio with multiple asset classes. While it may be possible to “outperform” by making a concentrated bet on a seemingly attractive investment, to do so entails a level of risk that we believe is unnecessary. Appropriate asset allocation should enable an investor to achieve attractive compound asset growth in the good years, while providing acceptable downside protection during the bad years. Asset allocation and rebalancing are the primary elements in the success of your investment portfolio.

The Seven Essentials for Portfolio Strategy Success

1.   Diversify Across Asset Classes
We select diversified asset classes using optimization techniques that focus on risk reduction. An asset class is considered to be a “homogenous” group of investments whose inclusion in a portfolio adds “value.” By identifying asset classes that are negatively correlated (i.e. when one asset class rises the other one falls) we are able to systematically reduce volatility and risk, which over time improves the probability of your success.

Examples of several asset classes are:  small cap domestic stocks, natural resources, real estate and international bonds. We incorporate many asset classes and greatly improve the diversification of your holdings. This diversification reduces downside risk and maximizes stability for a given level of return.

2.   Objective Security Selections
We make specific investment recommendations for each asset class. We screen from the entire universe of investments for money managers that are world class professional managers with an expertise within each asset class type. When a top performing active manager is not identified for a mutual fund, ETFs are used to participate in that asset class.

Your portfolio will consist of Exchange Traded Funds (ETFs) and no load/low expense Mutual Funds for the equity, real estate and international portions of your allocation since volatility is the greatest risk for these asset classes, highlighting the need for diversification. Individual Bonds are used for your domestic fixed income asset class since protecting your portfolio from duration and interest rate risk are the priority.

We believe also that security selection is nearly as important as asset allocation. A good asset allocation (or investment policy) means you participate continually as markets move through their cycles and experience less downside. Good securities selection can also help limit the downside in bad markets.

3.   Individual Bond Selection
We use individual bonds for the domestic bond portion to protect against duration and interest rate risk, reducing the possibility of capital loss on your portfolio. The advantage to using individual bonds is that we can tailor the cash flows of your fixed income investments specifically to your needs. By laddering the bond maturities, we can reduce the risk of capital loss. An added benefit is the reduction of management fees since there is no mutual fund management fee. We buy individual bonds at institutional rates directly from bond houses, which reduces bond cost. The savings can be as high as 25-50%. We only purchase the highest quality investment grade bonds (i.e. those with ratings of “A” and better) to guard against default. We work with experts in the field to devise the correct strategy that matches the current interest rate environment.

4.   Rebalance
In order to keep your portfolio structured according to the investment policy we have mutually agreed upon, we will frequently rebalance it to bring the weights back to our recommended allocation.

Studies show that rebalancing back to an original allocation can add to the long-term return of a portfolio beyond the performance of the asset classes themselves. That added performance comes with less risk. Rebalancing is a method to in effect sell high and buy low. We will be selling an asset class that although it performed well may have become expensive, and replacing it with an under performing asset class that may also be undervalued. We rebalance on a contingent basis, when needed, as opposed to a regular basis (i.e. quarterly).

5.   Capitalize on Institutional Pricing
Many of the mutual funds we use provide institutional level pricing. Their expense ratios are typically 40-50% lower annually than the charge to retail customers. We also have access to some top quality loaded funds—but without the load. In one particular case, a top quality growth fund with a load of 4.75% can be purchased by us without that load. The typical expense savings on the purchase of bonds is 25-50%. Some of these funds carry high minimums ($5,000,000) but due to our institutional status, we are able to acquire them for our clients.

6.   Maximize Tax Efficiency
We believe in harvesting losses as they appear since losses actually create a deferred tax asset. Losses will help shelter future gains and represent a means to partially recover from a market loss. When we harvest losses we will rebalance the portfolio to meet state objectives.

7. Behavioral Discipline
Baron Financial Group makes decisions based on merit, not emotions. We can control the quality of the investments we choose and the managers we hire. We use proprietary filters and analyses to choose the cream of the crop of investment managers. We are not interested in “flash in the pan” performance, but consistent good performance over many years. Finding managers with high “Alphas” and lower turnover helps fund the remainder of our fee, which lower expense ratios do not fully compensate for. If we no longer feel an investment’s performance is what it should be, we will replace the “failing” manager with a new and better one.

An important point to note is that when we buy a mutual fund we are not buying the fund but are instead “buying” or “hiring” the manager. We will hire and or replace managers as we deem appropriate, based on our analysis, and research.
Behavioral discipline and sticking with the strategy enable us to monitor the performance of your portfolio and make adjustments, as market conditions change, without emotion. There are times when our client’s portfolios are doing better than the S&P; there are other times when they are doing worse. But over time they are able to participate in the historical growth of the market.

High Stability Wealth Management