Location, Location, Location: Park Place or Baltic Avenue ?

How many times have you heard that the three most important factors in the value of real estate is location, location, location? You could buy five acres of land on Baltic Avenue to build your dream home - a home with a solid foundation, big closets, jacuzzi, spacious kitchen, deck and beautiful landscaping.  The only problem is that your dream home won’t grow much in value because it’s on Baltic Avenue rather than Park Place.

What location is to real estate is what asset allocation is to an investment portfolio.  In fact, the amount you invest in different investment flavors like stocks, bonds, real estate, commodities and cash will determine 90% or more of your future performance. That's why the foundation of our investment philosophy is a truly diversified portfolio - true because we use several (rather than a few) uncorrelated asset classes, including hedge funds.  We then implement each portfolio with superior investments, and monitor and adjust the mix according to market conditions.

A unique element of our investment style is hedging.  Hedging instruments can be complicated, but when used properly, they clearly boost performance, especially during bear markets.

Andy, Mary and Dale¹

To illustrate the benefits of diversification, consider the hypothetical investments of three friends, each with $500,000 to invest in December 1994: Andy, Mary and Dale.

Aggressive Andy

Andy has been aggressive with his investments since he starting investing in the early ‘90s. By December 1994, he had $500,000 in his IRA, and he wanted it to grow, grow, grow!                                                                                                     >>

¹Fictitious names have been given to the individuals mentioned in this narrative, and do not relate to the real owners of those names in any way.  Any such relationship is coincidental.

On Implementation......

In this game, the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch.                                                                                              Top of Page

-- Warren Buffett

On Adjusting......

I measure what’s going on, and I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend.                                               Top of Page

-- Martin Zweig