Risk Management

Risk management is a critical component of our investment approach, and the selection and combination of attractive “dividend-growth” candidates greatly affects a portfolio’s risk characteristics. Therefore, we strive to combine selected dividend-growth companies in combinations that reduce anticipated portfolio risk and dampen future price volatility.

The most common risk management technique is industry sector diversification. In recognition that different industry groups deliver different performance at different times, we strive to spread the portfolio investments reasonably well among various industry groups. We also attempt to reduce total portfolio risk by spreading the portfolio investments among companies of different capitalization levels. Generally our client portfolios are approximately 50% large-cap, 35% mid-cap, and 15% small-cap stocks. Another form of diversification is by investment style. We attempt to spread the individual investment positions such that portfolios are generally about 40% "value", 40% "core" and 20% "growth".

The result of these efforts to manage risk and volatility is the construction of portfolios that generally have historical volatility measurements equal to about half to three quarters of the general markets (specifically the S&P 500 index).