What is an Investment Philosophy? Why does it matter?

Perhaps a good place to start when discussing investment philosophy would be to look at a term with which many of us are more familiar – worldview. According to Merriam-Webster’s Dictionary, a person’s worldview is “a comprehensive conception of the world especially from a specific standpoint,” or more simply put, the way someone thinks about the world.

A person’s worldview influences how an individual interprets the world and interacts with it through the decisions they make on a day-to-day basis. A person’s worldview is evidenced by the order of their priorities. For example, one person’s worldview may hold the family of the utmost importance, thereby choosing to prioritize time with family, or even sacrificing personal goals for the good of the family. Another person’s worldview may hold personal honor as the utmost importance – which may lead them to prioritize this above time with family. Each person’s worldview influences what they see as the “right” choice.

An investment philosophy is very similar and linked to a person’s worldview – one influences the other. The way in which a person interprets events in the marketplace, their money management, and investment decisions all make up their investment philosophy and are influenced by their worldview.

A few of the most common investment philosophies are listed below. It is important to note that some investors may also hold a hybrid of these philosophies.

Value investing which involves seeking stocks that an investor believes are currently underpriced by the market and whose prices the investor expects will eventually rise significantly.
Fundamentals investing which relies on identifying companies with strong earnings prospects.
Growth investing in which investors buy shares of companies whose products or services hold the potential to generate strong earnings growth and higher stock prices in the future.
Socially-responsible investing which focuses on investing in companies whose practices align with an investor’s values as they pertain to the company’s impact on society and the environment.
Technical investing which relies on the examination of past market data to uncover hallmark visual patterns in trading activity on which to base buy and sell decisions.

Why does it matter?

This may seem very high-minded and theoretical at first, but it is easy to see why this matters in a practical sense.

There are many investment vehicles and investment plans to choose from – and none of us can invest in everything – nor would it be particularly profitable to do so. Each of us needs guiding principles when it comes to these decisions – that is where an investment philosophy is important.

If you are working with an investment management firm or financial advisor, it is important that your investment philosophy aligns with that of the firm or individual who is managing your assets. If not, you can guess that you may end up less than pleased with the decisions that are made in regard to your investments. It’s important to have conversations with your financial advisor to learn how they make decisions in regard to investment vehicles/portfolio allocation, debt (use or avoid), risk tolerance, taxes, and building wealth. If you find that you agree, all the better! And, if you find you disagree on the fundamentals, it’s positive as well – better to know up front than to experience friction down the road in that relationship.

Our Investment Philosophy

AP Wealth Management strives to provide uniquely crafted, personalized financial management solutions that empower our clients to ATTAIN their financial objectives, build their wealth, and PROTECT their legacy while embracing the highest standard of fiduciary excellence. We commit to using a disciplined process to achieve this excellence in our service and portfolio performance. We do this by constantly monitoring the security positions held in portfolios, review portfolio allocations on a weekly basis, evaluate our investment policy each month, and actively avoid panic during market sell-offs and allow for time and cyclical re-balancing of the markets.

We focus on seeking overlooked opportunities in our portfolio asset allocations. Our team creates customized investment strategies based on our client’s entire financial picture including lifestyle, risk tolerance, and age. Our solutions are crafted to be long-term and withstand the test of time.

Our core strategy generates TOTAL RETURN by emphasizing investment income in addition to capital appreciation. Custom-designed portfolios use our model groups to form a balanced and methodical approach to investing.

If you have questions about our investment philosophy or how we may be able to help you, please reach out to us at (760) 364-4281 or by email at [email protected].