Our Investment Strategy

As an investment firm in San Diego, 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 five 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.

Bull Oak Stay Invested
Source: Putnam

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.

Central Principals

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.

Behavioral Economics - We strive to instill 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, which we believe produces success. 

The Five Bull Oak Investment Strategies

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.

Bull Oak Aggressive


Aggressive: Strives to aggressively take advantage of global capital market investment opportunities while exhibiting less volatility and maximum drawdown than conventional equity portfolios over full market cycles. This strategy may be appropriate for investors who have a 10 to 15 year time horizon, a substantial tolerance for risk and an ability to withstand a permanent loss of capital.

Bull Oak Moderately Aggressive


Moderately Aggressive: Seeks to achieve equity-like returns over full market cycles but with less risk. This strategy may be appropriate for investors who have a 7 to 13 year time horizon, a high tolerance for risk and an ability to withstand a permanent loss of capital.

Bull Oak Moderate


Moderate: Seeks to achieve equity-like returns while exhibiting less volatility and maximum drawdown over full market cycles. This strategy may be appropriate for investors with a time horizon greater than five years and who have a moderate tolerance for risk.

Bull Oak Moderately Conservative


Moderately Conservative: Attempts to earn stable returns with low levels of volatility over time while accepting a small degree of risk and volatility to seek some degree of appreciation. It is designed to benefit during periods where the economy is thriving while protecting during periods of uncertainty and high levels of market volatility.

Bull Oak Conservative


Conservative: Attempts to earn stable returns with low levels of volatility over time while maintaining a focus on downside risk management. It is designed to benefit during periods where the economy is thriving. However, it also attempts to protect during periods of uncertainty and high levels of market volatility.

Our Fee Schedule

Total Assets Under ManagementAnnual Fee
$500,000 - $1,000,0000.99%
$1,000,000 - $3,000,0000.89%
$3,000,000 - $5,000,0000.79%
$5,000,000 - $10,000,0000.69%
$10,000,000 - $20,000,0000.59%
$20,000,000 and above0.49%

Our account minimum is $500,000. We calculate our fees using a linear schedule and not a tiered/progressive fee schedule. There are no additional cost for the financial planning process or ongoing advice. Our fee schedule is based off of the clients AUM (Assets Under Management) and we bill our clients monthly. 

Example: Client A has $2,100,000 invested with us, which would put this client at the 0.89% fee bracket. Because we bill our clients monthly, the fee would be $2,100,000 X 0.89%/12 = $1,557.50. 

For all of our clients, fees are automatically deducted from their investment account. A statement is regularly sent to our clients on a monthly basis, including fees, holdings, performance, etc. 

We strive to be completely transparent with our clients and that includes how much they pay us. We believe that this is a differentiator for us in an industry that is often opaque and misleading. 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.

Tax Efficiency

An important component to our investment strategy is 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 (avoiding less capital gains) in ETFs and we can implement a more tax-advantaged process by determining which shares are to be sold when selling a position (we can choose a those with a higher basis). You can read more on this topic here.

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 these assets/ETFs. For example, some assets have a higher tax tax liability (e.g. high yield bonds) vs. those that do not (e.g. tax-exempt bonds). Therefore, there should be preference as to where those assets should be held (Taxable Account vs. Traditional IRA/Pre-Tax vs Roth IRA/Post-Tax). We allocate our clients assets into each of the three account types (whenever possible) based on the tax efficiency of each asset class, thus driving overall tax savings.  

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 firm where you will have 24/7 access to your account. Learn more about TD Ameritrade's client portal here.  
 
 

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