Tax season is a busy time of year and this one coincides with the major reallocation of most all portfolios we manage. This update is to remind everyone of why we are doing it.
Here you go,
Dimensions point to systematic differences in expected returns on specific investments. Your portfolio can be structured around these dimensions which are sensible, backed by data, and cost-effective.
The Market Dimension – stocks have a higher expected return than bonds.
Company Size Dimension – smaller companies carry higher return potential than larger ones.
Dimension of Relative Price – value stocks (favorable price to book ratio) offer a premium over growth stocks.
The Profitability Dimension – highly profitable companies provide premium over low profitability companies.
In fixed income, two dimensions largely drive relative performance: term and credit. Longer-term bonds are more sensitive to changes in interest rates. Bonds with lower credit quality have a greater risk of default.
Implementation & Tax Docs
As we reallocate to make certain we are in keeping with the above, do not hesitate to reach out with any questions on how these ideas are being implemented in your portfolio. It’s not the same for everyone.
Speaking of things that are “not the same for everyone”, your 2014 tax document mailing varies too. Many were mailed on 2/16 and a few are delayed until 3/16. I can access them all online as available. Send me an email if you want me to check and forward yours to you electronically. I’m happy to do it and will be here to answer your questions.