The advisors at Harford Financial Group meet regularly with certified Fund Analyst Morgan Smith from Horizon as an investment committee. Our investment committee proactively monitors and adjusts our investment models if we see any room for improvement. We will not change the overall stock to bond investment allocation of our clients without discussion, but we will proactively make small tweaks as we see areas of opportunity or weakness. We review things like the current geopolitical climate and inflation and make decisions based on idea meritocracy. This means that the best ideas win, regardless of who or where they come from. Additionally, we regularly meet with representatives from different fund companies like Vanguard and American Funds to avoid group think.
In looking at our equities, we understand that predicting returns based strictly on valuations has proven to be ineffective. We have also found that no one can time the market and that the best strategy is a diversified one. The funds in our models are diversified among different sectors/ industries, countries and risk profiles so that our clients are best able to reach their long-term financial goals while minimizing risk.
We agree that the fixed income or bonds in our portfolios have 3 jobs:
o Dampen portfolio volatility
o Generate reliable returns through income (yield)
o Provide diversification benefits during equity market stress
With the current interest rate environment, returns have become diminished but fixed income still plays a very important role. This will be used to fund income for distributions in times of volatility- very much like we are facing now. That way, we do not make the biggest mistake an investor can make which is selling a stock at a loss. We are aware of the probability that interest rates will rise and impact bond performance, so we have made changes to utilize alternative fixed income strategies in some of our models. This, however, is with the understanding that the primary focus of fixed income is to dampen portfolio volatility and provide a smoother ride through turbulent markets.