Investment Management

The underlying analysis, data, and methodology may be extremely complex but the process and concepts must be easy to understand.  Just as our children learn in grade school; we start with the fundamentals….ABC’s and 123’s…. then build on that base knowledge. 

"Most people are beaten up by the market, instead of beating the market."

-President of Index Fund Advisors Mark Hebner, Founder, Index Fund Advisors, Inc.

A – Alpha :
Whether we know the term or not, we all strive to earn ‘Alpha’.  Defined as excess return for a given level of risk.  Most investors have either seen the graph below or heard of the concept.  For taking more risk, one should be compensated with an additional amount of return.  What if we can earn more return without taking on more risk? That’s Alpha.


B – Beta :
The risk of the market, called Beta is something all investments are exposed to.  We cannot eliminate Beta, all we can do is manage it.  For example, in 2008 during the financial crisis every stock in the S&P 500 index was down.  This is not because every Company was worse off, but because of Market Risk.  How do we manage Beta?  We decide which market risk is worth taking (ie. Compensating for taking the risk).  Bond market risk performs very different from stock market risk which has different characteristics than real estate market risk.

C – Capture :
This term may be foreign in non-finance land, but the concept is universal.  An investment account that ‘captures’ all of the upside and all of the downside is fairly simple.  Our goal is to Capture most (not all) of the upside and as little of the downside as possible.  An 80/20 mix is ideal. 


No investment strategy assures a profit or protect against a loss of principal.