The portfolio management process focuses on the investment goals and objectives of each individual client. We want to have a clear understanding of your expectations for capital growth, your current need for income and your risk tolerance. With that understanding, we work with you to develop an investment objective statement that serves as our guide in the construction and ongoing management of your portfolio. Our primary emphasis is on the preservation of your capital, while our secondary goal is to increase the value of your assets in a manner consistent with a risk/ reward strategy designed to achieve your long-term objectives for growth.
Asset classes used in the portfolio management process include individual stocks, bonds and bond surrogates, exchange traded funds (ETF’s), mutual funds, separately managed accounts (SMA’s), money market funds and cash. It typically takes anywhere from two to six months to get fully invested, based on macroeconomic and market conditions, as well as the current attractiveness of individual asset classes, industry sectors and their valuations. We strive to purchase high quality securities and to do so at a reasonable price.
We communicate our results clearly and regularly. We are also available to answer your questions directly. We want you to understand not just what investment decisions we made, but why we made them. As your needs and goals change over time, we work with you to modify your investment objectives, to be consistent with those life changes.
"I enjoy helping clients understand how we make decisions to buy or sell specific securities in their portfolios. I think it is important for them to be familiar with both the process and the logic involved."
-Bill Garrison, Senior Portfolio Manager
Please click here for additional comments from Bill Garrison, Senior Portfolio Manager at Godsey & Gibb Associates.
Equity Portfolios are comprised of a combination of individual stocks of mostly large and mid-cap growth companies based in the United States. Alternative investments such as exchange-traded funds (ETF’s) are sometimes used to give clients exposure to a segment of the equity market not fully covered by the individual stocks held at a given point in time. The level of cash employed in equity portfolios is based on the macro economic environment and market conditions.
Balanced Portfolios are comprised of a combination of stocks, as described in the Equity Portfolios section, as well as individual bonds and bond surrogates. The types of fixed income instruments used depend on each client’s income needs and tax considerations. The most commonly used securities are:
- U.S. Treasury notes
- U.S. Government agency notes
- High quality municipal bonds (‘A’ rated or higher)
- High quality corporate bonds (‘A’ rated or higher)
- Bank certificates of deposit (FDIC insured)
- Bond surrogates (investment grade utility and other high yield income stocks)
The fixed income portion of balanced accounts varies widely, and is particular to each client. Generally, maturity ranges run from one to ten years, and are based on the direction of interest rates, the state of the economy, the attractiveness of different types of fixed income instruments, and the liquidity needs of the client. The two objectives when using bonds are preservation of principal and the creation of cash flow to meet a client’s need for income from the portfolio.
Fixed Income portfolios are designed for two purposes: to preserve a client’s principal and to provide cash flow to meet a client’s need for income from the portfolio. The types of fixed income securities and bond maturity ranges used are described in the Balanced Accounts section.
Exchange-Traded Funds & Mutual Funds are utilized in our clients accounts based on a number of factors: provide exposure to mid-cap, small-cap, and international (developed and emerging countries). Our clients’ risk/reward tolerance is key in determining exposure to such assets classes. The market-cycle we feel that we are in is also an important factor in the usage of these investment vehicles. For instance, we would likely use mutual funds in a slowing economic cycle (active management) verses uses exchange-traded funds.
Managed Accounts are utilized in our clients' accounts to provide exposure to mid-cap, small-cap, and international (developed and emerging countries). Our clients’ risk/reward tolerance is key in determining exposure to such assets classes. Managed accounts are very similar to actively managed mutual funds. They are different from mutual funds in that dollars allocated to a Managed Account manager establishes your cost basis verses inheriting someone else’s cost basis when purchasing mutual funds shares. For this reason, when possible, we typically will use Managed Accounts in taxable accounts, although other factors are considered. Our “in-house” research department has a well-defined investment selection process for Managed Accounts. We feel that the selection of “outside” managers is just as important to us as selecting individual stocks for our clients. Managed Accounts provide our client’s access to world-class institutional money managers. We use them to complement our core equity strategy.
It is common for a client to come to us with a concentrated position in a company’s stock he or she worked for most of his or her professional life. In other cases, it is common for our clients’ to have owned a stock or mutual fund for serveral decades. We want to understand how our clients acquired their holdings. We respect that he or she might have an emotional attachment to a given stock or mutual funds. It is through a understanding, listening, and doing what we feel is in our clients best interest where we add value. Often it takes a professional advisor that does these things and one that creates an objective exit strategy that our client feels good about and that is tax wise. We have access to structured products such as equity collars, covered-call writing, and exchange funds. We will work with our clients to find the right solution based on the taxable consequences, liquidity needs, downside protection, and upside expectations.
Covered-call writing is one of several investment strategies that we put in place to generate income for our clients. In nearly all cases, we use this strategy for clients that have a concentrated stock positions. In addition to generating extra income, covered-call writing serves as an exit strategy for a concentrated stock position.
Several of our clients have stocks and mutual funds with a low cost basis. We do not believe in immediately liquidating an entire portfolio and incurring a significant tax burden for our clients. Instead, we work with our clients to transition the portfolio over time. This could be over a couple of quarters or over a period of several years.
Brokerage, IRA’s, Trust Accounts, company retirement accounts, and organizational accounts (for profit and non-profit) are account types that we service. We understand the importance each registration can have on its investment objective and beneficiaries. We also understand that a family can have more than one investment objective. Often, the account registration tells us a lot about the estate planning our clients have put in place. We work with our clients’ estate attorney, or we can recommend one that we entrust to care for our clients.
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