Overview
The Perspective Group’s portfolios are built using a process and methodology that starts with our values. These are:
Authenticity: Each portfolio that we design is as true to our strategy as life allows. We create portfolios to help people connect with investments in a way that resonates with them and communicates to them what they are investing in.
Transparency: Our portfolios are simple and clear. We build these either using individual stocks, exchange-traded funds (ETFs), or mutual funds. For those who want the best in transparency, using our portfolios that are built with either stocks or ETFs allows you to see which companies you are investing it.
Adaptability: We build our portfolios to allow for adaptability. We do not have minimum holding periods or create rules that would limit our ability to change to manage the days ahead.
Sustainability: Our portfolios are built to pursue long-term performance. And, by doing so, it helps you decide which portfolio is tailored for your situation. In addition to a portfolio that is built for the long term, many of our portfolios also include the use Morningstar’s globe rating system which we will revisit later.
Optimism: Investing in the long term works best if one is optimistic about the future. A pessimist may be tempted to change course at the next correction (which stock markets tend to do about every 18 months). A correction is defined as a 10% decrease from a recent higher point. They are as predictable (in concept vs. timing) as a blizzard and often it takes the optimist to see through the storm and know that the sun will soon return.
Our eleven portfolios incorporate these values. In broad terms, we have three portfolios that are designed for those who have a longer timeframe to invest and who are very comfortable with the day-to-day ups and downs of the market. Next, we have four portfolios that are built for the long-term investor, but who may also want to have more stability through day-to-day fluctuations. To help aim for this result we increase diversification through a wider array of investments and trading techniques. Lastly, we have four portfolios for those who may have an investment time frame of less than ten years. While they may in fact choose to hold these investments longer than ten years, they seek greater predictability of current income and added stability of principal versus our other longer-term investors.
Process
Constructing portfolios this way takes care and patience. It begins with a blank slate. Next, we evaluate the public market of traded securities to determine which combination of holdings will help us pursue the objective. We evaluate the investments based upon:
- Quantitative metrics such as profitability, growth, internal return on equity, and debt levels. For ETFs and mutual funds, we also incorporate the expenses that these holdings charge. All of our advisory, or RIA, holdings are either through direct stock ownership or are without imbedded expenses.
- Qualitative metrics such as how a company’s mission aligns with our vision of how the future will unfold, or a mutual fund’s rank on Morningstar’s globe system aiming for sustainability. Our process includes striving for using mutual funds with a four or, preferably, a five-globe rating. While we attempt to maintain a four-globe, or higher, rating for our portfolios, mutual funds with less than four globes may be maintained in the portfolios if circumstances dictate (such as there is no fund in the category with a four or five-globe rating, there are tax consequences associated with changing a fund that takes time to plan for, or the fund recently changed ratings and we are searching for a suitable alternative). In addition to the globe rating, we prefer to find funds that have consistent leadership (or manager tenure). We look to see if the manager, or team, invest in the fund, and we consider the stability and reputation of the parent firm.
The Morningstar globe rating is a sustainability score (or globe rating) that incorporates the environmental, social, and governance (ESG) qualities we seek out. Morningstar assigns one through five globes to a mutual fund based on a mutual fund’s holdings. It scores each underlying stock (security) with its sustainability score. It then evaluates its proportion of stocks that align with the sustainability (or globe) system relative to its peer group, and it is then normally distributed into five buckets. A five-globe rating means that its holdings (based on the past twelve months) represent the best 10% of funds in a particular category. This indicates to us that the fund, regardless of the name of the fund, has a high proportion of stocks that meet the Morningstar sustainability criterial. The next 22.5% of funds get four globes. The middle 35%, receive three globes, and so on. A one-globe fund is at the other end of the normal distribution and in the bottom 10% of a particular peer group (based on the investments it holds). Source: Morningstar Sustainability Rating Methodology 10.31.2019.
Once built, we maintain the portfolios through two concurrent processes.
Ongoing oversight
We maintain our portfolios using the Morningstar Workstation software platform that allows us to monitor the holdings on an ongoing basis. By doing this, we keep a close eye on the health of the investments and we can quickly adapt if conditions warrant. We also monitor the individual stocks’ performance using Investors Business Daily, Dividends.com, and Yahoo Finance to name key resources.
Systematic reviews
Each quarter we review the individual holdings (stocks) of our portfolios. And, every six months we conduct an intensive review of our ETFs and mutual fund holdings. Individual stocks report earnings quarterly and after each quarter we review the results and selectively listen, or participate, in quarterly conference calls. From our experience, hearing the strategy and plans from leadership often provides more value than the numbers.
Portfolios
We started with the purpose and by doing so, we believe we increase the chances of providing our clients with excellent alternatives. From there, we then created eleven portfolios that may align with our clients’ goals.
Aggressive Growth
Focus Five: This portfolio holds our five stocks that we have high conviction about, stocks that we think will do well in the upcoming years – relative to the market. We rebalance the portfolio annually, or anytime we make a change to the holdings.
Diversified Funds: Built seeking long-term growth using four, or five, globe-rated rated funds with a focus on total return. This portfolio holds seven mutual funds which are focused on holding stocks of companies that are potentially delivering higher, relative to peers, scores in Morningstar’s sustainability metrics.
Diversified ETFs: Built seeking long-term growth using tax-efficient, transparent, and low-cost ETFs. This portfolio may work well for the long-term investor who is most concerned with tax efficiency and keeping expenses to a minimum.
Growth
Diversified Funds: Built seeking long-term growth using four, or five, globe-rated rated funds with a focus on total return. This portfolio holds seven mutual funds which are focused on holding stocks of companies that are potentially delivering higher, relative to peers, scores in Morningstar’s sustainability metrics.
Diversified ETFs: Built seeking long-term growth using tax-efficient, transparent, and low-cost ETFs. This portfolio may work well for the long-term investor who is most concerned with tax efficiency and keeping expenses to a minimum.
Increasing Income
Dividend Achievers: Built seeking long-term growth in dividend income, this stock-based portfolio holds 30 stocks which have, or by our assessment may have, the potential for continued dividend increases.
Growth with Defense
Downside Defense: This strategy combines low-cost ETF investing with technical analysis to determine when to enter or exit the stock market. This strategy is designed in an effort to provide a circuit breaker that may help block a less-optimistic investor from taking the reins and “going to cash” in an emotional reaction. Rather, we believe, that many feel a greater sense of confidence knowing that our models aim to automatically guide us to more stable holdings, like bonds, during swift market declines.
Growth and Income
Diversified Funds: Built seeking long-term growth using four, or five, globe-rated rated funds with a focus on total return. This portfolio holds seven mutual funds which are focused on holding stocks of companies that are potentially delivering higher, relative to peers, scores in Morningstar’s sustainability metrics. The Diversified Funds include fixed income in an effort to increase income.
Diversified ETFs: Built seeking long-term growth using tax-efficient, transparent, and low-cost ETFs. This portfolio may work well for the long-term investor who is most concerned with tax efficiency and keeping expenses to a minimum. As with the Diversified Funds, the Diversified ETFs include fixed income to increase income.
Income and Growth
Diversified Funds: Built seeking current income and some long-term growth using four, or five, globe-rated rated funds with a focus on income. This portfolio holds seven mutual funds. The portfolio holds mutual funds which are focused on holding stocks of companies that are potentially delivering higher, relative to peers, scores in Morningstar’s sustainability metrics. The Diversified Funds include fixed income in an effort to increase income.
Diversified ETFs: Built seeking current income and some long-term growth using tax-efficient, transparent, and low-cost ETFs. This portfolio may work well for the investor who is most focused on income and stability yet is also concerned with tax efficiency and keeping expenses to a minimum. As with the Diversified Funds, the Diversified ETFs include fixed income in an effort to increase current income.
Disclosure:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Stock investing involves risk including loss of principal.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
Investors should consider the investment objectives, risk, charges and expenses of the mutual fund carefully before investing. The prospectuses and, if available, the summary prospectuses contain this and other important information about the mutual fund. You can obtain prospectuses and summary prospectuses from your financial representative. Read carefully before investing.