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Investment Principles
Markets Work: Capital markets are the mechanisms for pricing securities and as such the best determinants of a security's value.
Risk and Return are Related: Exposure to the risk of certain asset classes - the stock market as a whole; small company stocks; value stocks; long-term bonds; low-quality bonds - determines expected returns.
Diversification is Essential: Thorough diversification across asset classes in US and international markets is essential for reducing the unnecessary and uncompensated risks of investing.
Passively Managed Portfolios are Superior Investment Vehicles: Passively managed portfolios are low-cost, tax-efficient investment vehicles that provide precise and reliable exposure to the parts of the market that drive returns.
Actively Managed Portfolios are Inferior Investment Vehicles: The hope of active managers, unfulfilled, is to beat the market consistently and predictably through security selection and market timing.
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