Investment Philosophy

Traditional money managers do one of two things: “Active” managers focus on picking individual stocks, the antithesis of diversification; “Index” managers hold many securities to mimic arbitrarily constructed benchmarks (such as the Standard & Poor’s 500). 

The Professionals at Doxa Financial use a different approach. The guiding investment philosophy of Doxa Financial's Advisors is to construct portfolios with carefully measured diversified asset class exposures, leading to potentially higher performance on a more consistent basis. Our philosophy has been shaped by the belief that successful portfolios not only capture return by taking on investment risk that generates expected return, but also avoiding risks that do not add to returns. Avoidable risks include holding too few securities or betting on countries or industries (lack of diversification), following market predictions (timing), and speculating on information from rating services. To all these, discipline the antidote. Proper diversification washes away the random fortunes of individual stocks and positions client portfolios to capture the returns of broad economic forces*. 
 
Our philosophy is consistent with the tenets of Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM), theories for which Harry Markowitz and William Sharpe shared the 1990 Nobel Prize in Economics. Specifically, our investment process is based on the foundation of advanced academic research which convincingly demonstrate that over 96% of the variation in stock returns and risk can be explained by just three systematic risk factors (the ‘Three-Factor’ Pricing Model, published by Eugene Fama and Kenneth French, University of Chicago, 1992).  An improvement over earlier theories, the Three-Factor model considers overall market exposure; company size; and company value (measured by its book-to-market ratio). Using just these three factors, research showed that stock picking, market timing and other selection schemes contribute less than 4% to long term portfolio returns. 
 
 
We believe that thoughtful construction of portfolios, using a blend of carefully selected investment vehicles to engineer the risk-return performance attributes of these three factors, and managed in a disciplined and consistent manner represents the most consistent, predictable and effective way to help meet long-term investment objectives. 
 

Portfolio Strategies

Our portfolio strategies are based on scientific evidence, rather than on commercially available products. We diversify portfolios not only by the number of securities held, but also in the range of distinct capital market strategies represented. 
 
Our structured strategy involves a patient and disciplined approach to investment management, compared to an “active” approach that emphasizes individual stock selection and frequent trading in attempting to “beat the market”. Our disciplined approach does not involve frequent trading or market timing as a means to meeting long-term investment objectives. Our method is significantly more cost-effective and tax efficient than the active alternative, due to reduced trading expenses and lower portfolio turnover. The Doxa approach results in more investment dollars consistently at work in the investment markets, creating a compounding of returns and leading to the opportunity for significantly higher portfolio values over long periods.
 
Supporting our structured investment philosophy is a disciplined investment process that includes a comprehensive assessment of each client’s objectives, risk tolerance and investment time horizon.  The goal of each customized Investment Policy Statement is to generate maximum portfolio performance, consistent with predetermined risk levels. Portfolios are regularly reviewed to ensure integrity of construction, and periodically rebalanced in order to reflect changing market dynamics or client objectives**.
 

Solutions and Services

Doxa Financial has developed a series of individual model portfolios designed to capture a broad exposure of risk – return relationships using a diversified blend of high quality investments. These model portfolios have investment objectives ranging from Income and Capital Preservation to Aggressive Growth. Our emphasis has been to build a powerful set of integrated solutions enabling clients to effectively manage risk and gauge the predictability of anticipated performance. 
 
Each model portfolio has undergone rigorous quantitative analysis and qualitative review for integrity of design and construction, validity of performance attributes, and overall presentation effectiveness. Collectively, they represent a truly compelling offering of diversified investment vehicles for long-term investors desiring a disciplined and cost-effective way to build and preserve financial independence.
 
The Doxa Financial investment process matches clients with appropriate portfolio solutions through a risk tolerance assessment, using a formal questionnaire, and suitability review before the establishment of investment objectives. For taxable accounts, portfolios can be further customized using tax managed funds or created on a separate account basis depending upon individual client circumstances and preferences. All client portfolios are regularly reviewed and rebalanced as necessary in order to address changing market dynamics, shifting client objectives or other appropriate considerations.
 
In addition to the primary focus on high quality structured investments, Doxa Financial client portfolios may also involve the ownership of actively managed mutual funds, individual stocks, individual taxable or tax-exempt bonds, or other non-discretionary assets. In these situations, client needs will be qualified on a case-by-case basis with respect to overall account administration, portfolio composition, tax strategies, and diversification objectives as part of a total investment management relationship.  
 
 
 

*Neither Diversification nor Asset Allocation guarantee against loss.  They are methods used to help manage investment risk.

**Rebalancing assets can have tax consequences.  If you sell assets in a taxable account you may have to pay tax on any gain resulting from the sale.  Please consult your tax advisor. 

 

NFP Securities, Inc. does not provide legal or tax advice.  Any decisions whether to implement these ideas should be made by the client in consultation with professional financial, tax and legal counsel.