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Investment Management Only

market theory of investing

AFA believes in the efficient market theory of investing. This means that the developed world stock markets efficiently process information and immediately reflect the prices of new information immediately in each individual stock. The implication is that the market prices of companies are immediately priced into the stock price so it is futile to stock pick or to try to beat the market. As matter of fact, Nobel winning academic research and studies has shown that over 10 to 20 years, 67% of managed mutual funds do not perform as well as their performance market index benchmarks. These same studies have shown that the cost of investing is the major determinate of fund performance. The conclusion to this vast amount of research is that low cost, diversified, passive, market index investing has the highest probability of achieving individual financial goal targets.

Investment Management Criteria

AFA crafts individual portfolios for each of our clients based on the following criteria:


Time is the most important factor in determining the make-up of the asset selection in the construction of a portfolio.


Are you employed by a business that is highly cyclical such as real estate or one that is more resilient against market cycles like the heath care business?

Risk Tolerance

“Are you a Stock or a Bond?"

What is your personal tolerance for risk or short term investment losses. When markets are rising, people tend to not concern themselves with risk, it is when markets contract, like in 2001 & 2008, when we are confronted with our true aversion to risk. Stocks are approximately 4 times more volatile or risky than Bonds.

Expected Returns

What are the returns that you require to meet you financial goals in the future. The 6 month U.S. Treasury Bill rate, which is currently yielding 0.14% annually, is the baseline for a risk free asset. If you need a higher expected return, you must invest in riskier assets to get to your goal number. Over the last 75 years, Bonds have yielded 5.6% and stocks, a volatile/risky asset class, has returned on average about 9%. Your expected return andother factors will determine your appropriate asset mix.

Asset Class Preference

Based on all of the other criteria, we determine the asset class preference for your portfolio. It is prudent to only take risk for which you need to take and will be compensated for taking. If a client already has all of the money they need to fund a comfortable retirement over their expected life span, it would be imprudent to have a portfolio that is equity/stock heavy (riskier). This is taking risk that the client doesn’t need to take.

Tax Status

AFA uses Electronic Traded Funds (ETF) and low cost mutual funds to construct portfolios for our clients. We look for funds that have low portfolio turnover and operate tax efficiently. Additionally, we optimize asset location to optimize the tax treatment of your different account types. Tax deferred accounts such as IRA and 401K accounts should hold assets that generate ordinary income distributions and taxable accounts should hold more tax efficient equity funds that have low asset turnover and generate foreign and domestic qualified dividend income.

Investment Management Services

To construct a proper investment portfolio, it is imperative for us to know the financial details of our clients extremely well. AFA portfolios are low cost, risk appropriate, tax efficient and appropriately diversified based on your individual criteria. We recommend you have us construct your portfolio monitor it regularly and rebalance it over time systematically. 

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