Our Investment Strategy
We spend the better part of our time researching and focusing on how macroeconomic events and investor behavior impact long-term returns. In short, emotional investing, frequent reactive trading, and expensive account fees (e.g. commissions, leverage, etc.) are detrimental to portfolio returns. We have designed an investment strategy of best practices to help our clients avoid these pitfalls. The investment strategy focuses on our central principals: low-cost/passive management, risk management, and behavioral economics. We believe that investment portfolios should be constructed by using data and research as its framework, not by relying on investor consensus and personal hunches.
Instead of building "customized" portfolios for our clients (which we don't believe is feasible nor practical), our three strategies (below) were created by studying time-tested methodologies and by keeping a long-term horizon. This is of the greatest import. Staying invested during the long-term is the single biggest factor of portfolio success.
Yet, many individual investors do not stay invested over the long-term. Market volatility, media reports, and short-term thinking drive most investors to sell, limiting returns. We help our clients mitigate these errors by implementing our central principals: low-cost/passive management, risk management, and behavioral economics.
Low-Cost/Passive Management - Empirical evidence has shown that most active investors (those trying to outperform the market) underperform the market over time. Over the past 5 years, ending June 2017, 82.38% of those funds have underperformed the S&P 500 (Standard & Poor's).
Over the longer-term, 15 years, the figures get worse with 92.2% of funds underperforming. If these were Vegas odds, nobody would be playing this game. However, investors continue to play because they are simply unaware of the odds stacked against them.
We place the odds in our clients favor by simply refusing to play. As technology continues to advance and as information diffusion continues to accelerate, we believe that the sub-asset classes will continue to become more efficient, making active management more difficult. We save our clients the cost and headaches of active management and instead purchase inexpensive passive index funds for our clients. We select and continuously monitor the most appropriate representative fund for each of the major stock, bond, and alternative markets.
Risk Management - To help keep clients from making the grave mistake of selling during periods of high volatility, we created the Risk Contribution Method. This methodology helps remove the natural human instinct of buying high and selling low (where we should be buying low and holding on for the long-term). It will instead underweight asset classes of high risk and overweight those of low risk. You can read more about this here.
Behavioral Economics - We strive to create positive behavioral heuristics within our clients. The goal is to stay invested during the long-term, whether the market is bullish or bearish. This is achieved by 1. implementing our Risk Contribution Method, 2. training our clients to keep a long-term view, and by 3. keeping an open line of communication with our clients. We aim to be as transparent and communicative as possible with our clients and we believe this produces success.
The Three Bull Oak Investment Strategies
We offer 3 investment strategies for our clients: Conservative, Moderate, and Aggressive. Dependent upon their time horizon and personal risk tolerance, we believe that most investors can be placed into one of the three strategies.
To learn more about the origin of the investment strategy, feel free to read the whitepaper that served as the firm's feasibility analysis. Keep in mind that while the whitepaper may have helped launch Bull Oak Capital, there have been several upgrades to the overall investment strategy. Market research and analysis of the capital markets is a never-ending endeavor. As such, our understanding and interpretation of the markets is always improving.
The firm's investment strategy was created by Ryan Hughes, UCLA finance professors, and top industry professionals. It was created while Ryan engaged in a graduate research project while studying quantitative finance at the UCLA Anderson School of Management. The goal was to build an investment strategy that combined empirically-proven strategies used by some of the most successful investors.
All of our client's assets are held at TD Ameritrade where they have 24/7 access. You can have peace of mind by knowing that your money is held at an established institution that you can trust.
Our household asset minimum is $500K. Our fee schedule is based off of an "Assets Under Management" (AUM) fee model, which includes all investment management and financial planning services provided by us. As a fiduciary Registered Investment Advisor (RIA), the only revenue we receive is directly from our clients. We do not receive compensation via commissions, product fees, etc. This means that your incentives are aligned with our incentives. The better you do, the better we do. All with transparency.