SIM's primary investment tenet is that
equities outperform fixed income in the long term. In addition, long term
investments should never be sold without first considering the after-tax
consequences to the client portfolio. Since the taxation of capital gains is
substantial, the sell discipline for each account may vary. We consider
after-tax returns our most important focal point and the most important
measuring standard. However, given the volatility of the market, it is
important to create a portfolio that most adequately reflects the risk profile
of the client, including the ability to endure market uncertainty.
an era of increasing financial volatility, choosing the right investment
counsellor or portfolio manager is one of the most important decisions
investors can make about their financial future. At SIM, we firmly believe that
the road to success in wealth management calls for a value-based, conservative
approach to investing. Using this balanced approach, we strive to equal or
exceed the long-term results of the major equity indices for our clients
without having to be fully equity-invested.
The SIM investment
philosophy follows this conservative and balanced investment approach.
Portfolios are structured according to each client's investment objectives and
constraints, risk tolerance and financial circumstances. Through analysis and
collaborative discussion, a financial profile and risk-tolerance level is
determined and an appropriate investment allocation strategy is developed and
Research efforts are directed toward the selection
of undervalued stocks in relation to their the asset value or long term earning
power. Our time horizon is generally at least five years and we concentrate
primarily on large cap companies. Thus, portfolios will generally have a lower
price-earnings and price-to-book value than the market averages. Some of the
stocks may be out-of-favour companies which are not popular among research
firms. Often, in cases like this, we attempt to identify some catalyst, such as
a change in management, that will allow the true value of the company to be
recognized. However, in some cases, it may simply be a matter of time.
Regardless, this focus on value should reduce the volatility of the portfolio,
relative to the overall market, while still providing substantial returns.
Such things as financial strength, franchise value, management depth
and asset quality are important factors going into the decision process. Though
there is no predetermined number of stocks considered optimal for a portfolio,
SIM prefers to limit individual holdings to no less than 1% and no more than
10% at the time of purchase.
As previously mentioned, fixed income
investments are selected to serve two functions: to hedge against uncertain
markets and to provide income. Though capital gains can be achieved, the
trading of fixed income investments is limited. Instead, a more conservative
approach will be taken, keeping the portfolio's average term to maturity in the
4-7 year range.