As free market prices fully incorporate available information, price change consequently reflects unexpected new information; therefore the current price is the best estimate of a fair price. In other words, technology and information move at such at a rapid pace that it is virtually impossible for someone to gain a competitive advantage by attempting to leverage information available to the public ahead of someone else.

The expected return of a diversified portfolio is determined by its exposure to the compensated risk factors, therefore the high costs and risks of speculation are unnecessary and potentially harmful to an investor’s long-term outlook. In other words, almost all of the performance of a portfolio can be explained by the asset classes it is investing in.

Investors should expect to be compensated for assuming risk. However, not all risks carry a dependable reward. Our investment recommendations seek to capture the historical risk factors that have appropriately compensated investors for risks taken, including market, size, value, and profitability for equity and term and default for fixed income. In other words, there is a balance between risk and reward, but only when the risks are appropriate.

Diversification within and among corresponding asset classes lets investors effectively capture the returns offered by the financial markets, in accordance with their risk capacity. In other words, in order to have an efficient portfolio where you are effectively maximizing your expected return for the appropriate amount of risk you are taking, don’t have too many eggs in one basket.