Investment Philosophy
We can't control markets. We can control what our clients pay, what they own, and how carefully we manage taxes. Every portfolio we manage is built around those decisions, and as a fiduciary we make them in the client's best interest.
Keep costs low
Fund expenses and trading costs come directly out of what clients earn, so we keep them as low as practical.
Own broadly
Broad, index-based funds spread risk across a wide range of companies instead of a few concentrated bets.
Manage taxes carefully
Fund choice, trade timing, and where each investment is held all affect what clients keep after taxes.
Every Portfolio Starts With the Plan
Asset allocation is based on each client's goals, time horizon, income needs, tax situation, existing holdings, and ability to stay invested through market declines. Two clients with similar account balances can end up with very different portfolios. The investments described below are the tools we use to put each plan into practice.
Low-Cost ETFs at the Core
The stock side of our portfolios is built mainly with broad, index-based exchange-traded funds that give clients wide diversification at a low cost. Around that core we add small- and mid-sized company exposure where it fits the plan, using the same approach. ETFs also tend to distribute fewer capital gains than comparable mutual funds, which can make them more tax-efficient in taxable accounts.
Individual Bonds When They Make Sense
On the fixed income side, we prefer individual securities to bond funds when an account is large enough to build an appropriate portfolio. We primarily use U.S. Treasury bills, notes, and bonds, along with FDIC-insured CDs. Unlike a bond fund, an individual Treasury or CD has a set maturity date and a known value at maturity. That lets us line up maturities with the dates clients will need the money, rather than depending on a bond fund's price on the day it is sold. Treasury interest is also exempt from state income tax, including Connecticut's, though it remains subject to federal income tax. Smaller accounts use low-cost bond ETFs instead.
A Patient Approach
We are not active traders. We don't try to time the market, react to headlines, or chase whatever performed best last year. Portfolios are rebalanced when they drift from their targets or when a client's circumstances change, and every trade is weighed against the taxes and costs it creates. Staying invested through ordinary market declines is part of the plan.
Independent Fund Selection
We are not affiliated with any fund company. We choose funds based on cost, how closely they track their index, trading liquidity, tax efficiency, and fit with the rest of the portfolio. Most client portfolios are built from Vanguard, Schwab, iShares by BlackRock, and SPDR by State Street funds. When an actively managed fund earns a place, we look for a long track record and reasonable costs, and we use its no-load share class. For the individual accounts we manage, assets stay in the client's name at Charles Schwab & Co., Inc., an independent custodian.
What We Generally Avoid
These are not absolute rules, but they are where we start.
High-cost annuities. Many annuities layer insurance, administrative, and rider costs on top of the underlying investments and limit access to the money through surrender charges. We prefer simpler, lower-cost solutions unless an annuity's guarantees or other features provide a meaningful benefit for the client.
Loaded fund share classes. A, B, and C share classes carry sales charges or ongoing distribution fees that largely pay the selling broker. We use no-load share classes instead.
High-expense active funds without a clear reason. A more expensive fund has to earn back its extra cost before it adds anything. We use one only when there is a specific reason it belongs in the portfolio.
Concentrated bets. We don't build portfolios around a handful of stocks or a single sector. When a client already holds a large position in one company, we look for a tax-aware way to reduce it over time.
When a client already owns these products. Many new clients arrive holding annuities or loaded funds. Before recommending a change, we weigh surrender charges, the tax cost of selling, any guarantees worth keeping, and the advisory fee that would apply going forward, then move toward lower-cost holdings when it makes sense for the client.
The Same Discipline for 401(k) Plans
On the 401(k) plans where we serve as the ERISA 3(38) investment manager, we select and monitor the investment menu with the same focus on cost, broad diversification, and fit for the plan's participants.
Simple When Possible. Sophisticated When Necessary.
Complexity is never the goal. Most of our work is straightforward: keep costs low, own broadly, and stay patient. Some situations call for more custom work, such as building a bond ladder around retirement income, drawing from accounts in a tax-aware order, or unwinding an older annuity. When that work is worth it, we do it.
Want to see how this would apply to your portfolio?
Let's TalkNorthshire Consulting LLC | Registered Investment Advisory Firm
Northshire Consulting LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. This material is for informational purposes only and is not a recommendation to buy or sell any security. Investing involves risk, including possible loss of principal. Diversification does not guarantee a profit or protect against loss. Bonds are subject to interest rate, credit, and inflation risk, and their value may fall if sold before maturity. CDs are FDIC-insured up to applicable limits. Fund companies named are examples of providers used and are not endorsements; holdings vary by client. Advisory fees apply in addition to fund expenses. Tax information is general and may not apply to your situation.