For those vis­i­tors who want a more com­plete under­stand­ing of our invest­ment phi­los­o­phy and the research that led us to our invest­ment tech­niques, here is a more in depth dis­cus­sion.  Much of this infor­ma­tion has been taken from our soon-to-be-published book “Improv­ing Returns, Basis Point by Basis Point”. For addi­tional read­ing, we’ve com­piled a list of other resources in our library.

diversificationLike all top invest­ment advis­ers, we believe that mar­kets are, by-and-large, effi­cient and that “beat­ing the mar­ket” is a fool’s errand.  Like top advis­ers, we start with diver­si­fied equity and fixed income allo­ca­tions and use best-in-class low-fee index funds.  That is where the indus­try stops and 3 factor begins.

3 factor seeks to deliver the best real­is­tic after-tax per­for­mance with min­i­mal risk via via tax opti­miza­tion, sophis­ti­cated re-bal­anc­ing, low fees, and asset allo­ca­tions sup­ported by many invest­ment and aca­d­e­mic lumi­nar­ies1.   By mak­ing your tax­able accounts more IRA-like, our stud­ies show that your tax sav­ings more than pay for our low fees.

We hope you find “3 factor Invest­ing 101” informative.

3 factor Investing 101


Evidence Based Investing

The Case for Indexing

A Short History of Index Investing

ETF’s vs Mutual Funds

Do Excellent Companies Make Good Stocks?

Portfolio Construction

Asset Allocation

Expert’s Allocations

Where Do I Start?

The Real Work

Portfolio Rebalancing

Investment techniques That Add Value

Other Topics

Monte Carlo Simulation

Wealth Management

Better Returns Through Research

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(1) Analy­sis com­par­ing after tax per­for­mance of other advi­sors (or a self-managed, sophis­ti­cated investor) to 3 factor based on a glob­ally diver­si­fied port­fo­lio with a 60% equity, 40% fixed income allo­ca­tion. Ini­tial port­fo­lio val­ues assume the fol­low­ing: (a) $750k tax­able and $250k IRA with yearly addi­tions of $20k to tax­able account and $5k to IRA. (b)Taxes deducted via shares each April, assum­ing the high­est tax bracket for a Cal­i­for­nia investor. 

Past per­for­mance is not a pre­dic­tor of future performance.

3 factor has con­ducted exten­sive analy­sis con­cern­ing port­fo­lio per­for­mance. See “impor­tant dis­clo­sure” for details and dis­claimers regard­ing our state­ments con­cern­ing per­for­mance, and the var­i­ous assump­tions we have made in our analy­sis.