Wealth Management

“Beating the markets” typically drives money managers so they try desperately to predict the future. Moving in and out of asset classes hoping to catch them before they swing in or out of favor and buying and selling specific stocks and bonds attempting to make their move before prices go up or down are often the results. The reality is that most managers do NOT consistently beat the markets. In fact:

• The typical actively managed mutual fund underperforms a benchmark index fund by more than two percent per year. 1
• Between 67% and 85% of actively managed funds underperformed their corresponding S&P Index over the past 5 years when measuring the 5-year period ending March 31, 2007. 2

Synergy Wealth Partners and its partners have evaluated decades of research from Nobel Laureates and leading academics. This research demonstrates that investment success is primarily the result of portfolio construction and the efficiency of capitalism itself.

We do not attempt to outsmart the markets by picking the right stocks or searching for the right active fund managers. Instead, we build diversified portfolios that offer investors consistent exposure to all markets, delivering an investment experience resulting in a more sophisticated, less expensive approach to benefit from the built-in efficiencies of the markets.

Despite markets being inherently efficient, you cannot predict their movements. So if you want to consistently benefit from them, you need to be invested across all of them, all of the time. That way, when one market segment goes up, you’ll be there to reap the gains and conversely when another segment goes down, you’ll never be overly exposed to its losses.

We take diversification further.

We do not believe that you achieve optimal diversification with hundreds of stocks but instead with thousands of them. We do not just focus across the U.S. market, but across the world. This takes the emotion out of investing and puts the most advanced academic research into practice. Our portfolios diversify across:

• More than 15 different asset classes;
• More than 10,000 individual stocks and bonds; and
• 40 countries across the globe.

The best way to lower the overall risk of a portfolio may be to add ‘riskier’ assets, which may seem counterintuitive. Remember, it is all about balance. Different types of investments react differently to the same market conditions. In fact, the more distinctive the investments, the less “correlated” their returns. In other words, the less likely they’ll move in the same direction at the same time.

Diversifying across the spectrum of asset classes, around the world, and among thousands of securities is essential to reduce certain risks – such as picking a few “loser” stocks or being heavily exposed to one country’s faltering equity market.

In order to optimize returns, however, there are some risks that may be worth pursuing. To determine which risks may generate higher returns, we apply research from the world’s leading academics to guide how we weight our portfolios. So while past performance is no guarantee of future returns, we do take the following factors into consideration when engineering our portfolios.

Emphasis on stocks over bonds

Over time, stocks have delivered higher returns than fixed-income investments. 3

Emphasis on value stocks over growth stocks

Investments in “value stocks” – companies whose stock prices are relatively low – tend to be riskier investment than “growth stocks,” companies that appear poised for future gains. But since 1927, large value stocks have had an annual return of 11.21%, while large growth stocks have averaged 9.42%. So we concentrate our equity allocation more heavily in value stocks. 4

Emphasis on small company stocks over large company stocks

Over time, small company stocks have also delivered higher returns than large company stocks. Since 1927, small company stocks have delivered an annualized return of 11.92% while large company stocks have averaged 10.35%. 4

Synergy Investment Management knows the key to investing success is balance. We diversify across asset classes, but strategically weight that exposure toward investments that may offer the potential to optimize returns for fairly priced risk.

At Synergy Investment Management, we don’t just design portfolios to be highly diversified, they must also be highly efficient. We go above and beyond to minimize every fraction of returns lost to income taxes, transaction costs and other inefficiencies. We further distinguish ourselves from other types of passive investing, including index investing by the following:

Providing access to institutional funds

We have the uncompromising objectivity to pick some of the best investments for our portfolios because we do not manage the underlying funds or get any compensation from the underlying fund managers. We use the highly diversified mutual funds which are not available directly to most individual investors. What makes these funds such sound building blocks is that they represent “pure” asset classes, meaning they stay invested within their stated category, not drifting into other areas in a misguided attempt to try to maximize returns.

True Diversifying

At Synergy Investment Management, we choose funds that diversify deeply within each asset class by purchasing thousands of stocks in that asset class. That helps you optimize the true benefits of diversification – to minimize risks and maximize returns.

Minimizing transaction costs and ongoing taxes

Our portfolios are managed on several measures of efficiency – both at the fund level and at the portfolio level. The funds employed focus on minimizing both trading costs and taxes. In addition, we utilize a unique selection of funds designed to avoid unnecessary transactions.

Consistency when maintaining allocations

Synergy Investment Management will regularly rebalance portfolios to maintain their stated mix of investments. We consistently stick to the stated allocation strategies, until there’s an overwhelming reason to change them. By doing this, you always know the composition of your portfolio. Our special relationship with Institutions and Financial Advisors is what sets us apart. It is a partnership based on a shared investment philosophy and there is no traditional retail access to the funds that we use.