Investments

At its very core, successful investment management is aligning each client’s portfolio with the right mix of investments. To do this well, there has to be a consistent methodology for both assessing each client’s risk preference and creating different portfolios that take into account risk level and personal factors such as time frame, need for liquidity, concerns about different kinds of investments, experience, etc.

Click on the tabs below for more discussion on the investment process.

Risk assessment begins with a conversation with an adviser about a client's beliefs, past investment experience, stage in life and other things that could influence a person's or family's risk preference.

During these discussions, Golden Trail Advisers highlights the trade-offs between risk and return. Before the risk assessment is finished, clients complete a four-page Risk Tolerance Questionnaire with input from the adviser. Click here to view the Risk Tolerance Questionnaire [[LINK]]

During this phase of the process, Golden Trail Advisers gets a good handle on how well each client can deal with the ups and downs of different combinations of investments.

Portfolio construction entails several key steps. Up-front analysis includes top-down asset allocation and bottom-up security selection. During the holding period, performance is monitored and decisions are made to keep certain investments and to trim back or eliminate others. In parallel, continuous research into possible new investments is conducted.

And, importantly, clients are kept informed by receiving reports from both the custodians and Golden Trail Advisers. These reports from Golden Trail Advisers play a big part in the regular meetings and communication with clients.

Top-Down Asset allocation has been formalized into a model that is based on the insights and refinements that began in 1998 when Mike Sedlak, chief investment officer of Golden Trail Advisers, performed asset allocation and investment research at Responsive Financial Services. The methodologies have been updated and enhanced over time resulting in a unique approach to asset allocation. The use of "alternative" investments expands the opportunity set and improves the risk-return characteristics compared to portfolios that consist mainly of stocks and bonds. Below is a conceptual view of the asset allocation model in use at Golden Trail Advisers today.

Top Down Allocation

Bottom-Up Security Selection is the process of identifying and researching the possible alternatives for filling each role that asset allocation identifies as a "need" in the portfolio. For example, if Golden Trail Advisers is looking for a manager for small company value stocks, extensive research is completed in that area of the market until a "winner" is selected for use in portfolios.

The list of criteria has been developed over years of use and includes both qualitative measures and quantitative measures. A big factor is consistency in both historic results and methodology. A more subtle factor is the investment climate. If certain investments would appear to have the wind at their backs due to established trends, these items would have a higher likelihood of being included in the portfolios. Below is a sample of a research report for one of the holdings in Golden Trail Advisers' portfolios.

Bottom Up Security Selection

 

Ongoing monitoring considers both performance and other changes that could impact performance in the future.

This monitoring process can lead to three conclusions:

  1. continue to hold the investment
  2. eliminate the investment entirely, or
  3. trim the level of holdings

Ideally, the up-front research process would result in securities that perform wonderfully over time and would not need to be replaced. In reality, changes occur in methodologies, the ability to execute or in the management teams at various fund companies or sub-advisers. Sometimes Golden Trail Advisers comes to the conclusion that client assets would be better off by switching investments. The chart on the right shows the daily performance of the S&P 500 (red line) along with three of the managers that are included in Golden Trail Advisers portfolios today.

Ongoing Monitoring

Client reporting is provided directly from the custodian firms that hold client assets, such as TD Ameritrade. In addition, Golden Trail Advisers provides executive-level reporting of investment holdings, activity and performance across clients' entire group of accounts. We use the reporting process to communicate results as well as identify opportunities for changes that could enhance future performance. Clients like these reports because they can tell what is going on by looking at a few pages.

Golden Trail Advisers is one of the few firms that oversee the reporting process in-house. Every day, the records of Golden Trail Advisers are reconciled with the custodians' records so that client reports are timely and accurate.

Client Reporting

New investment ideas are gathered by Golden Trail Advisers from many sources. We communicate with leading investment management companies several times a week. We initiate research into the different areas of the market based on internal performance or external developments. We also share ideas among a group of seven independent investment advisory firms in the area.

So, in addition to the investments held in client portfolios, we have managers at the ready to step in if needed. Occasionally, a new strategy will be discovered that will impact the overall asset allocation models of the firm. A recent example under consideration is a dynamic strategy that adjusts holdings to maintain the risk level within predefined parameters when market risk levels change.

New Investment Ideas

 

At Golden Trail Advisers, we accept responsibility for handling the investments of our clients. We take this responsibility very seriously. Our clients know that their investments are being watched on a consistent basis, which is one more way we help you on "your path to financial well-being."

Investment