Model portfolio strategies remove human emotions from the stock selection process.  The stocks for each model are chosen on facts.  You know what attributes your stocks will possess before purchase and you know the same style is utilized year after year, unlike mutual funds which tend to style drift over time.

Models have no emotions.  They don't have bad days or arguments with spouses or hangovers or mortgages.  They pay no attention to colorful stories, fads, press releases or hunches.

Model portfolios are groups of stocks with common value and/or growth attributes.

Value attributes, or factors, suggest that the stock price is cheap based on traditional fundamental analysis.  The growth factors reveal, among other things, stock prices in a strong uptrend.  Models represent the marriage of fundamental analysis with technical analysis.

We screen a database of over nine-thousand stocks for specific value and growth factors and then reduce the list down to the twenty to fifty which best fits the model.  Then we buy near-equal dollar amounts of each and in about twelve months we screen the same database for the same attributes.  Stocks that no longer qualify are then sold and replaced with the new stocks that do qualify.

Depending upon the size of your account, we usually use from 10 to 50 stocks per model.  We know on the front end that some stocks will most likely disappoint us, but our only concern is with the net return of the model.  The stocks that do well usually take up the slack.

Annual rebalancing also helps keep costs low since we trade only one day per year, at most. Models tilted towards value criteria can sometimes remain intact for longer periods, as long as most of the stocks currently held still qualify for inclusion in the model.  We might fine-tune a portfolio replacing one or two stocks under some circumstances but generally we rebalance your account about once per year.

Example Allocation

When portfolio size allows, we increase your diversification by using two to three different models.  For example, we might allocate your assets as follows:

$2 million Portfolio

Large cap value model (40% or $800,000)

Large cap growth model (30% or $600,000)

Mid cap growth and/or Small Cap growth model (25% or $500,000)

Short-term bonds, T-Bills, bank CDs, and liquid money market funds (5% or $100,000)

This hypothetical portfolio offers:

• Diversification (by industry, by number of stocks, by country).

• Foreign exposure to foreign large caps and small caps, which helps decrease volatility and increase returns.  (The mid cap model excludes foreign stocks).

• Growth and income potential - most of the large caps pay relatively high dividends, currently from 3% to 4%.

• Rational stock selection methods based on facts, not emotion.

• Time-tested strategies that have worked well over long periods.

Call Bill Bowers today to discuss which combinations of model portfolios are right for you.

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Model Profiles ● Client Information ● Fees ● Taxes ● Mutual Fund Facts