Broker Check

Registered Investment Advisory Services Include:

Five-Step Asset Allocation Process

Step 1 At our complementary initial consultation, we develop a personal profile of your individual investment needs and objectives, time horizon, and tolerance to risk.

Step 2 We will develop a personalized asset allocation policy based on your specific needs and goals relative to your tolerance to risk.

Step 3 We will implement your asset allocation policy by investing in a well-diversified portfolio of investments approved by you.

Step 4 Your investment portfolio is carefully monitored on an ongoing basis so that it remains consistent with your agreed-upon asset allocation policy.

Step 5 You will receive regular communications that provide a comprehensive reporting package including performance reports and a complete accounting of your account.

For additional information contact us at Personal Financial Profiles.Inc.

Investment Planning

The investment planning process begins with getting you organized. At our initial complimentary meeting, we will gather information about you and your finances. After analyzing this data, we can determine the proper investment strategy to pursue to meet your specific financial needs and goals according to your tolerance to risk.

Investor Profiling

Investors are like snowflakes, no two are exactly alike. Whether your goals are growth of assets, current income, preservation of capital, minimizing taxes, or a combination of all of the above, it is critical you discuss them in detail with a knowledgeable investment professional before investing.

It is also imperative for you to understand your "real" tolerance to fluctuation of portfolio values, or portfolio risk. Markets drive returns and no one can stop the emotions you feel in volatile markets. On the other hand, a well-diversified portfolio that meets your specific financial needs can minimize the downside risk of any one market.

The amount of time you have until you need to access your investments seriously affects your portfolio strategy. Regardless of the type of assets in your portfolio, the longer you hold any particular asset class, the less variation in your return.

Portfolio Design

Research has shown that the asset allocation decision or how your investments are diversified among asset classes such as stocks, bonds and cash has the most impact on overall performance.

Many theories regarding how to best structure investment portfolios have been developed. Most of them do not stand up in the light of experience. The Modern Portfolio Theory (MPT) of asset allocation is an exception.

The MPT has four basic premises:

  1. Investors are risk adverse.
  2. Markets are efficient.
  3. Selection of asset classes is the most important factor to maximize performance
  4. For every level of risk there is an optimal combination of asset classes that will maximize returns.

The MPT also states that risk can be divided into "diversifiable" risk and "non-diversifiable" risk. It further states that diversifiable risk can be reduced by investing in a number of different assets. Non-diversifiable risk can only be reduced by investing in lower risk securities such as T-bills instead of stocks. The long term expected return is dependent upon how much non-diversifiable risk an investor is willing to accept. The higher the risk, the higher the potential for long term gain.

This theory of asset allocation has become the favored portfolio management technique of most major institutions. An indication of the legitimacy of the process is that the three professors shared the Nobel Prize for economics in 1990.

Our process uses four key elements in evaluating the asset allocation policy to develop:

  1. Our analysis contains numerous years of statistical mean total returns of specific asset classes over various time periods.
  2. Standard Deviations, a measure of risk, determine how variable an asset is in achieving its average return. The higher the standard deviation, the higher the variability of returns, either up or down, around the mean average return.
  3. Sharpe Ratio, named after William Sharpe, who was one of the three Nobel laureates who were honored for their work in this field, is a measure of efficiency of the returns attained for the risks assumed of various assets. It is derived by subtracting the risk free return from the expected return and then dividing the result by the standard deviation. The higher the Sharpe Ratio, the more return you can expect to receive for the risk you are willing to assume.
  4. The Correlation Coefficient is a measure of how one asset behaves relative to another over time. If two assets behave similarly, they have a positive correlation, and if they behave differently, they have a negative correlation. This helps to understand the predictability of one asset class, given the knowledge of another. In constructing your portfolio, it is imperative to include asset classes with low correlation coefficients.

By applying these four elements to an analysis of the historical data of the asset classes which are appropriate for you, we can then develop a range of returns which can be expected from the recommended portfolio over a given period of time.

Research has shown the importance of asset class selection as compared to market timing and selection of portfolio holdings. On average 94% of the variability in the returns in a portfolio during a given ten year period could be explained by asset class selectionMarket timing decisions contributed to 2% of returns and individual security selection contributed to the remaining 4%.

Professionally Managed Individual Bond Portfolios

If you think high quality and insured bonds have no risks "if you hold them to maturity," well guess again. The purchasing power of a $25,000 bond purchased 30 years ago adjusted for annual inflation of 3% would be $10,025 in today’s dollars. It is also important to understand how and why bond values fluctuate. Keep in mind the direction of interest rates affects the value of bonds, because when interest rates decline, bond prices increase, and when interest rates increase, bond prices decline. The longer the maturity, the greater the affect on the value.

Managing bond risk is very important, especially if you are dependent on their returns to maintain your current lifestyle. Individually managed, laddered maturity bond portfolios are a simple way to maintain a reasonable yield while protecting your fixed-income principal.

At Personal Financial Profiles, Inc. (PFP), we design, implement and monitor both tax-free and taxable bond portfolios to meet each client’s specific goals and investment objectives. We are able to implement institutional accounts which allows us to buy fixed income instruments in a competitive market and pass the savings on to our clients. We custom design the fixed income portion of your portfolio to maximize return and preserve principal with a minimum amount of market risk.

Since our portfolios are managed on a fee basis and PFP acts as a Prime Broker through Schwab Institutional, fixed income instruments such as corporate,  municipal or government agency bonds, CD’s and U.S. Treasury securities are placed in the portfolio on the bid side of the market. There are no pullbacks or hidden charges. All bonds are obtained on a net cost basis, which means that your portfolios will have attractive yields, good quality ratings, with much shorter maturities.

Managed Equity Portfolios

Comprehensive Financial Planning

Other Services Include:

  • Comprehensive Business Planning
  • Retirement Planning
  • Profit Sharing Plans
  • 401(k) Plans
  • Tax Planning
  • Estate Planning
  • Charitable Trusts
  • IRAs – Traditional, Rollover, Roth, Roth Conversions, and Educational IRAs