SAN DIEGO INVESTMENT FIRM

INVESTMENT STRATEGY OVERVIEW

5 BULL OAK STRATEGIES

We offer five investment strategies to our clients, ranging from Conservative to Aggressive. Our strategy is different than most Wall St. firms as ours is based on two primary factors: 1. we invest exclusively in low-cost index funds and 2. we take a global macro approach that focuses on proper risk levels.
PASSIVE INDEXING
It is well known that trying to beat the market is near impossible. Those that trade individual securities, including stocks, bonds, and futures, rarely beat the index. In fact, over the past 5 years (Dec 2018), only 17.9% of active managers have beat the S&P 500. When faced with these odds, we elect not to try. Instead, we use passive index ETFs for all of our client portfolios.
RISK CONTRIBUTION LEVELS
The economic business cycle is a long-term cycle that can last anywhere between 2 to 15+ years. These cycles always exhibit periods of extreme exuberance and panic-selling. By using well-documented research, we can help our client portfolios by underweighting equities when economic cycles begin to shift and overweighting when stocks are near their lows.

OUR TWO GUIDING PRINCIPALS

PASSIVE INVESTING

Research shows that an important source of alpha for fund managers is access to better connections rather than superior skill. (Di Maggio, Franzoni, Kermani, SommavillaAs such and as a registered investment advisor, we will invest exclusively in index ETFs. Empirical evidence shows us that the vast majority of active managers (those trying to beat the market) underperform the market. Over the past 5 years ending December 2018, only 17.9% of active managers have beat the S&P 500 (Standard & Poor’s).

2018 SPIVA

Over the longer-term, 15 years, the figures continue to decline with only 5% of funds outperforming. As a fiduciary financial advisory firm, we place the odds in our clients’ favor by simply refusing to play the active management game. 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. We select and continuously monitor the most appropriate representative fund for each of the major stock, bond, and alternative markets.

RISK CONTRIBUTION LEVELS

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.

While the sub-asset class levels (e.g. U.S. large-cap stocks) are largely efficient, the major asset classes are not. It is common for stocks to be at risk when an economic slowdown is imminent, whether that be a growth rate slowdown or an economic expansion. Sometimes, but not always, this coincides with periods of investor euphoria. In short, when stocks have had a good run and they are at their riskiest, we simply take some money “off the table.”

bull oak economic and leading indicators

It is also common for stocks to be underpriced during periods of investor panic and economic contraction. After a stock market crash, we are able to take advantage of cheaper equity prices and buy at discount prices.

The Risk Contribution Method identifies these periods by carefully evaluating reliable forward-looking indicators (read more here). We then underweight those risk assets and overweight others to take advantage of these misaligned prices.

TECHNOLOGY

You will have 24/7 access to your accounts that includes balances, positions, asset allocation, performance, statements, tax forms, RMD amounts, and others. In addition, you will also be able to track your overall net worth in real-time, a critical piece when evaluating your long-term financial goals.

SERVICES

WHERE YOUR MONEY IS HELD

All of our client’s assets are held at TD Ameritrade via brokerage accounts (IRA, Roth IRA, Trust, Jt Ten, etc.). We do not directly custody our client’s assets. Your account(s) is held at a large, well-known advisory firm where you will have 24/7 access to your account.

TAX EFFICIENCY

Because we invest exclusively in passive ETFs, we have a major advantage over mutual funds and other actively managed accounts. There is far less turnover in ETFs, which in turn avoids capital gains. Through our advisory services, our financial planners can also implement a more tax-advantaged process by determining which shares are to be sold when selling a position (e.g. we can choose to sell only positions that have a higher basis).

Aside from the inherent tax-efficient nature of ETFs, we also help our clients lower their tax liability by choosing the most efficient place to allocate their assets. Some assets have a higher tax liability, such as high yield bonds, vs. those that do not, including tax-exempt bonds. Therefore, we place preference as to where those assets should be held (Taxable Account vs. Traditional IRA/Pre-Tax vs Roth IRA/Post-Tax) driving significant tax savings.

OUR FEES

Our fee schedule is designed to be fair and transparent. As a fiduciary advisor, we do not receive commissions, kickbacks, or any other form of outside compensation.

As our account minimum is $750K, our fee schedule begins at 0.99% of assets under management (AUM) and falls as the household balance increases. For a full breakdown of our fee schedule and computations, please click below.

VIEW FEE SCHEDULE

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