The Next Frontier…the Core Equity Strategies
The academic model of investing developed by a select group of academicians continues to evolve...with the latest manifestation found in the advancement of a more integrated solution called the core equity strategies. These strategies target expected return, along with the reduction of portfolio friction (costs) which so often impedes effective investment planning.
Core strategies are integrated portfolios that hold a wide range of equity securities. Across this range, each core strategy is designed to achieve a progressively stronger exposure to the greater expected returns of small cap and value stocks. Yet, in achieving these exposures, each core portfolio manages to contain virtually every stock in the market.
Using these core strategies with their strategic tilts helps capture the same expected return as the more traditional component strategy (which is composed of individual investment pieces for each separate asset class), but with a significant reduction in the usual costs. This cost savings occurs, in part, because in the component strategy, transactions are forced by the buy and sell rules required to maintain the integrity of each particular asset class. When a transaction takes place, the investor bears the cost of the trading which , in the end, does nothing more than move a stock from one asset class to another. It's like absorbing commission costs, price impact, and tax costs just to move money from one pocket to another. In addition to these savings from transaction costs, there can be significant tax savings resulting from the potential reduction of capital gains distributions.
Capturing the compensated dimensions of returns while minimizing needless risks and costs is what the core equity strategies are all about...and represents the next logical step in the evolution of an idea.
| US Applied Core Equity |
Applied Core 1, Applied Core 2
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Minimizing the Routine Costs of Asset Allocation
While Capturing the Compensated (Small and Value) Dimensions of Returns
A Plan for the Future
In the final analysis, at Plancorp we see markets as an ally, not an adversary. Rather than trying to take advantage of the ways markets are mistaken, we take advantage of the ways they are right...the ways they compensate investors. We design portfolios to capture what the market offers...in all its dimensions.However, the work is never complete. The final chapter will never be written. But a process grounded in academic science can only improve the odds of financial success. The peace of mind and clarity of such an approach is, in itself, reward enough for most investors... its long history of documented performance only adds to its allure.By applying modern financial principles to wealth management, Plancorp remains ahead of the industry...and stands ready to assist you in addressing your investment needs.