What is your portfolio management approach?

This is the most frequently asked question.  Actually, much depends on what is important to you, the client.  To answer this question, I would need to understand your financial situation, your risk profile and your investment time horizon.  Before becoming a client, we would discuss these questions in detail.  Once we’ve determined your priorities, we can craft a strategy that suits you.  The approach varies depending on the your needs, risk profile and level of comfort level with the market.

In general, I believe that a multi-disciplinary approach is necessary in today’s world.  These days, markets are interconnected, money moves very quickly and so do markets.  The traditional approach of buy and hold worked well from the early 1990s until the turn of the century.  But that same approach has proven difficult, and even stomach-turning, in the 21st century.  Since 2000, we’ve had three significant downturns – 2000-2002, 2007-2009 and 2011.  The market has been volatile, and few have been able to escape the market’s gyrations.  Moreover, the old school tenet of diversification has failed during these downturns. Assets, with the exception of bonds, have been highly correlated.  This means that investments have moved together, so diversification across sectors has not prevented a drop in portfolio values.

So instead of buy and hold, I look at four factors whenever I make an investment decision: macroeconomic factors, money flows in the market, fundamentals and technicals.

Markets in today’s world are characterized by cycles, which are in turn driven by macroeconomic considerations.  Nowadays, investors have to take into account factors such as the state of the general US economy; the politics of Washington; the situation in Europe, or the condition of China.  So this is the first factor I look at: which way the world economy is headed.  Second, money flows matter.  Governments, central banks and large investors regularly make decisions that affect the directions of markets; following the direction of funds, or the reasons for the the movement of funds, can help determine the direction of markets.

The macro situation tells us, very generally, which way the market is headed.  But to realize gains, strategic analysis must be turned into tactical trades.  To decide when to buy or sell a stock, I also use a combination of technical analysis, which looks at the supply and demand for a stock; as well as the fundamentals, which is an analysis of the ability of a company to generate profits.

Despite these tools, I would never claim to be able to pick a top or bottom in the market.  Still, such precision may not be necessary.  Since 2000, even being able to avoid some moderate fraction of the market’s downturns would have made a significant difference in an individual’s portfolio.  So that’s the goal: try to understand the market’s cycles, try take advantage of the up cycles and try to avoid some of downturns (which we are very likely to face again in the coming years).

That’s the general approach.  I take the general approach and adapt it to an individual’s needs.  I do manage portfolios individually, I don’t know how to do it any other way and serve you, the client.

How do I keep up with what’s happening in the portfolio?

Each account is housed at a brokerage house that will provide statements, trade confirmations and tax documents.  This will allow clients to track the balances and movements in the portfolio.  However, to understand the reasoning behind the trades, I regularly write a blog as well as a letter to clients that details my current thinking on the markets.  And of course, clients can always call and ask questions.

Do you use margin and options?

For those that are comfortable with the use of options, I recommend their use.  Often, brokerage accounts require that clients have margin ability in an account before options are enabled.  However, I very rarely use an account’s margin capacity; I prefer not to have that degree of risk in an account.

Where are my funds placed?

You can place your funds at the institution of your choice.  Such institutions will act as custodian and provide monthly reports, annual reports and trade confirmations.  You, as the client, would sign a limited power of attorney, which would allow me to trade your account but would not permit me to take possession of your funds.

For those that are comfortable with the use of options, additional margin and options forms must be completed.

Is there a minimum amount of funds required?

Client portfolios start at $50,000.

What are the fees involved?

Fees are comparable to standard industry practice.  Fees are billed quarterly in advance.

What’s the process for becoming a client?

First, we discuss your financial situation and your objectives.  We’ll go some paperwork as well, which includes the advisory agreement and what’s know in the industry as a brochure, which details the advisory relationship and any other business interests of the advisor.  Should you decide to become a client, we determine where your funds will be held and proceed with the paperwork for that process.

What are your qualifications for your work as a financial advisor?

I spend a great deal of time studying the markets; I find markets interesting and am quite determined about it.  To me, that’s the most important thing to look for in a financial advisor: someone who is actually interested the markets, and how interested they are in your portfolio’s performance.

In addition, I blog and write on the markets regularly and also give seminars on investing in the Los Angeles area.

My previous employers include McKinsey & Co., the Fortune 500 consulting firm; Goldman Sachs & Co.; and Chinavest/Taiwanvest, a China-focused venture capital fund.  Also, I have been an independent consultant and have worked for entertainment firms, services companies and start-ups.  During my time at McKinsey, I worked in healthcare, manufacturing, banking and retail.  Finally, I am currently a member of the Board of Chinatrust Bank USA.  I have an MBA and an MA Political Science from Stanford University; an AB Cum Laude in Government from Harvard University; and Certificates of Study from the Institut des Hautes Etudes Internationales (HEI) in Geneva, Switzerland.

I’m always happy to answer questions, so please feel free to contact me at any time.