Investment Approach

Almost all of the modern investment industry is built on the idea that smart investors can use today's limitless informational resources, powerful analytical tools and the opinions of experts to beat the market.

It makes sense: By picking the right stocks, the right broker, the right manager or the right time to buy or sell, investors can earn returns that not only beat the averages, but also beat their less informed, less discerning peers.

We agree that it's an appealing, even reasonable, concept. But we do not believe it.

We do not believe that investors (neither individuals managing their own portfolios nor professional money managers) can systematically beat overall market returns over any significant time period. In fact, it appears that the harder they try to do so, the less likely they are to be successful.

What We Believe

At Lauterbach Financial Advisors, LLC, we have clear convictions about the nature of markets and what it means for portfolio creation and management:

• Markets Work We believe that markets price securities so efficiently that it is not possible to systematically earn above-market returns by buying and selling based on currently available information like earnings reports, past performance, or economic data.
• Diversification is Key We believe that holding a broadly diversified portfolio representing many different asset classes reduces overall risk and allows favorable performance in a variety of market conditions.
• Costs and Taxes Matter We believe that the erosion of returns caused by transaction costs, management fees and tax exposure is far greater than most investors realize. Controlling costs and taxes is essential to producing desirable investment outcomes.
• Risk and Return are Related We believe the exposure to risk factors, not selection of individual securities, is the primary determinant of expected return.
• Active Management Adds No Value We believe market timing, stock picking, manager picking, style picking, chart reading and other techniques used by active investors and managers fail to beat overall market returns over time. In fact, we believe the harder they try to do so, the less likely they are to be successful.

What We Don’t Do

We think it is important to avoid certain investment practices. This includes the use of hedge funds; venture capital; and private equity, direct commodity or currency investments. We view these as forms of speculation rather than investing and believe these vehicles are not appropriate in any prudently designed portfolio.