The concepts of “buy and hold” and “stocks for the long-run” are often sold to investors based on completely unrealistic precepts. Our financial lives are not one clean linear event that starts when we’re 25 and ends when we’re 65. Our lives happen all the time and our savings represents a repository that must be allocated properly to meet our changing needs. That means not only that it must grow, but it must grow in a manner that doesn’t expose us to excessive permanent loss risk. The concepts of “buy and hold” and “stocks for the long run” are nice in theory, but buying and holding a portfolio of stocks exposes us to the rollercoaster ride of the stock market without accounting for the reality that our financial lives require greater stability than this rollercoaster can offer.
With this in mind, we construct portfolios that are multi-temporal. They are not merely for “the long-run” or the short-run. They are customized to meet the specific needs of clients in order to create a portfolio that actually reflects your life and not some textbook theory about “the long-run”.
More importantly, we reject many of the ideas that formulate the basis for Modern Portfolio Theory. Concepts like the Efficient Markets Hypothesis, the Efficient Frontier and rational expectations are simplifications of a complex world that imply that a static portfolio of ex-post financial assets can help us achieve our financial goals. The reality is that the financial world is dynamic with changing relative asset risks and changing personal needs over time. This requires a certain degree of dynamism within portfolio managements and our management style seeks to evolve over time with the changing risks of the market and the changing needs of our clients.