Investment Policy Statement

A well written Investment Policy Statement (IPS) is important for the success of your relationship with Ventura Advisors. The IPS is a contract describing the management strategy of your assets. It outlines your financial situation and goals, risk tolerance, and asset allocation. Most importantly, the IPS guides our actions during periods of volatility, and keeps us focused on long term goals. Your IPS will be a unique document written to reflect your individual circumstances.

 

Asset Allocation

Asset Allocation is the process of assigning your investment resources to various vehicles. We believe that Asset Allocation is the most important decision in portfolio management, and that the goal of Asset Allocation is to provide the greatest return to our clients, given the amount of risk that they are willing to bear.

Assets are chosen based upon the expectation of how they will provide returns to our clients and/or reduce overall portfolio risk. While all investments carry some level of risk, a greater percentage of equities in a portfolio generally leads to higher expectations for long-term growth, although short-term loss (sometimes substantial loss) is possible. Combining many assets that do not move in tandem (non-correlated assets) is known as diversification and is one of the most effective ways to maximize expected return for a given risk level.

 

Portfolio Management

Once the Investment Policy Statement and Asset Allocation plans are created, securities are then selected for the portfolio. In the case of portfolios that are already invested, securities are reviewed for fit within the scheme of the portfolio.

For taxable accounts, it is important to take potential capital gains and losses into consideration. Perhaps you hold large positions of low cost basis stock that would yield significant capital gains if sold. While diversifying that position would be key, we would also need to consider the potential tax consequences and create a plan for the necessary diversification to be implemented over time. At Ventura Advisors, we work closely with your tax professional for guidance as to how best to manage your portfolios given your particular tax scenario.

As we move forward with your asset management, we will communicate regularly with you to explain our thinking.

 

Retirement Planning

Assets held within retirement accounts are generally not subject to income tax; they grow according to the performance of the underlying investments until distributions are taken. Distributions from retirement accounts may or may not be taxable, and the taxation depends on the type of account that you have.

Whether you are currently contributing to retirement plans or contemplating withdrawal strategies, the decisions that you make today will have long-term consequences to your wealth. If you are contributing to plans today, you must consider whether to contribute to Roth, traditional, or other retirement plans. If you are withdrawing from retirement plans, you have to consider distribution rules, tax implications, and lifetime income needs. Whether contributing or withdrawing, it is always prudent to evaluate the wisdom of converting traditional retirement accounts to Roth accounts.

At Ventura Advisors, we want you to understand your options so that you can make informed decisions. We understand the rules that govern IRA withdrawals and Roth conversions, the tax consequences of those actions, and the impact on your financial goals. We will help you develop a long-term strategy to maximize the benefit of your retirement accounts.

 

Diversification

Diversification in investing is crucial for managing risk and enhancing returns. By investing across different asset classes, industries, and geographic regions, we reduce the overall risk of your portfolio. Some benefits of diversification are:

  • Risk Reduction: Diversification helps mitigate the impact of poor-performing investments. If one asset class or industry underperforms, then gains from other investments might offset the losses, leading to a more consistent overall return.
     
  • Unsystematic Risk Mitigation: Unsystematic risk (specific to individual companies or sectors) can be minimized through diversification. For example, owning only airline stocks exposes you to industry-specific risks. By adding a variety of stocks in other industries, you balance your portfolio and reduce vulnerability to industry-specific events.
     
  • Market Risk Management: While systematic or market risk (overall market fluctuations) is unavoidable, diversification helps to manage it. Different asset classes perform differently during various market conditions.  That differing performance can reduce the impact of market volatility on your portfolio.

While diversification does not guarantee against loss, it is a fundamental component of a prudent investment strategy.

 

Estate Plan Review (Attorney Referral)

A key component of successful wealth planning is a solid estate plan. In working with clients through the years, we have found that some people are very good at creating wealth but have not yet taken the time to plan well for how that wealth will be passed to their loved ones.

While we are not attorneys and do not provide legal advice at Ventura Advisors, our staff has experience administering trusts and can review your estate documents with you.

The goal of a review is to share with you how your plan functions and to confirm that it accomplishes your intentions. At times, we have uncovered issues in estate plans that needed correction. In these instances, our clients consulted the appropriate professionals to correct the deficiencies.

If you have an estate planning attorney, we will help you to discuss any issues with that attorney so they can make the appropriate changes. If you do not have an estate planning attorney, we will provide you with referrals and assist with conversations to get an estate plan in place.