The 12 Great Reasons

Cedarwinds was launched with the simple goal of creating the best set of investment portfolios available anywhere to help individual and institutional clients effectively manage the risk-return relationship.  To achieve this goal, we have constructed a full range of model portfolio solutions using a strategic blend of high-performance, globally-diversified, low-cost index mutual funds and exchange-traded funds (ETFs).  An important part of our overall marketing message involves helping our target audience understand the compelling benefits associated with our investment approach.  A summary of these program benefits is reflected in the following points which we call “The 12 Great Reasons.”

1. "Core" Strategy

Our core investment strategy is simple to understand, disciplined in its process and consistent in its outcome. We focus on building wealth over the long run using the most effective investment technique available to accomplish this objective—strategic asset allocation. Our roster of model portfolios offers a comprehensive range of risk-adjusted returns using a strategic blend of globally-diversified asset classes. The disciplined, patient investment philosophy we advocate avoids the seductive trap of trying to “beat” the market using arbitrary, short-term timing techniques, speculative stock picking or sector rotation strategies. With our approach, there are no apologies that need to be made about investing in a particular asset class that may be out of favor. Instead, the fundamental objective is to determine how much risk-adjusted return each client is seeking consistent with their individual circumstances, financial goals, investment time-horizon and tolerance for risk. Academic studies confirm that our disciplined “buy-and-hold” investment strategy is the most effective way to consistently capture those returns over time.

2. Momentum-Based Strategy

In addition to our core model portfolios, we have created a tactical asset allocation, momentum-based strategy using specific exchange-traded funds designed to take advantage of the shorter-term dynamics known to exist in the global markets.  The performance results of our proprietary strategy demonstrate the effectiveness of our rules-based approach in taking advantage of periods when there is upside momentum in the equity markets as well as providing downside protection when the markets are declining.  By blending together our strategic, ”buy and hold” program with our tactical, momentum-based style we are able to offer clients investment solutions that capture the best of all markets when conditions are favorable while mitigating the severe downside risk that periodically occurs. 

3. Access to Institutional Index Funds

Our strategic partnership with Dimensional Fund Advisors allows us to provide clients with unique access to a comprehensive range of outstanding mutual funds managed by the acknowledged global leader of structured index fund investing.  Founded in 1981 and currently managing approximately $250 billion in fund assets, DFA has no retail offerings—you can't buy into their funds the way you would at Vanguard, Fidelity or any other retail fund company.  Their funds are only available through a limited number of registered investment advisors like Cedarwinds that have met established standards for representing DFA in the investment marketplace.

4. Greater Returns, Lower Risks, Broader Diversification

Based on extensive academic research and the rigorous financial engineering used in our asset allocation process, our investment approach is designed to provide investors the opportunity for greater portfolio returns and lower volatility compared with active managers.  Over longer time periods, our model portfolios have consistently delivered higher risk-adjusted returns* versus comparable actively managed investment styles due to the limited diversification and intrinsically higher costs associated with active management.  As a reference point, the global diversity of equity holdings in our core portfolios includes positions in over 12,000 individual companies across 44 countries. (*Past performance does not guarantee future results.)

5. No Minimums, Reduced Costs

We have no minimum investment requirements for our core program.  Further, our indexed approach and low cost management philosophy result in extremely low investment fees as contrasted to the high annual costs of running actively managed funds or the layered costs of “fund of funds” products.  In fact, the operating expenses of the funds used in our core model portfolios average less than 40 basis points annually compared to the average cost of actively managed equity mutual funds of 150 basis points or more, depending on portfolio turnover and other hidden expenses.

6. Lower Taxes

For taxable accounts, our approach minimizes taxes due to low portfolio turnover with the resulting benefit of reduced capital gains taxation.  Specific strategies used to reduce taxes include:

• Avoiding short-term gains
• Harvesting capital loss
• Minimizing dividend income
• Tax-lot accounting

7. Compounding Wealth

The investment approach used in our core strategy results in superior compounding of investment wealth compared with actively managed funds.  This is because we remain fully invested while also minimizing performance “leakage” due to our lower trading costs, smaller turnover expenses and reduced capital gains taxes. In our formal client presentations, we offer a number of examples that quantify and graphically illustrate the differences in ending investment values of our indexed approach compared to actively managed alternatives.  Our experience is that most investors typically have little appreciation for the incredibly erosive effect that costs have on performance and portfolio values over longer time periods.

8. Efficient Portfolio Rebalancing

Our core style makes it easier to rebalance model portfolios and maintain a consistent asset allocation over time, thus avoiding the style drift which typifies active portfolio management.  This ensures portfolio integrity and helps performance predictability.  Depending upon each client’s specific objectives, we generally employ two rebalancing techniques.  First, we have the ability to automatically rebalance portfolios on a quarterly basis to preserve the integrity of the model portfolio baseline weighting.  Our second approach is more flexible and involves a review of underlying asset class performance at the fund level with a view to rebalance on a more periodic basis depending on tax considerations, transaction costs and individual client needs or preferences.

9. Performance Consistency

Instead of matching an index that may somewhat arbitrarily represent an asset class, our portfolios strive to achieve the highest risk-adjusted returns for the underlying asset classes they invest in.  As a result, while the DFA funds used in our core portfolios may not look exactly like the best-known index for that asset class, they do reflect the purest representation of each asset class.  This asset class purity is what drives the consistency of performance and therefore the relative predictability of our model portfolio risk-return relationships over time.

10. Superior Performance Tracking

Our core investment approach represents a much easier way to track relative investment performance because our portfolio returns can be efficiently compared to similarly weighted benchmark indices.  This is in contrast to active management styles where valid, long-term benchmarking may be difficult or impossible due to hybrid or blended management styles, style drifting, shifting fund objectives, fund mergers, newness of the fund, and a host of other reasons.

11. Award-Winning Client Satisfaction

We have received recognition from a number of third-parties, including the FIVE STAR Wealth Manager program for the last three years sponsored by Milwaukee Magazine.  Awarded to the top 7% of investment advisors in the Milwaukee market, this recognition is a testament to the over 100 years of industry expertise delivered by our management team along with our laser-focused commitment to provide every client with investment excellence, unparalleled service and exceptional value.

12. Reduced Stress

We frequently hear that the most important benefit of our program is that our clients no longer experience the anxiety associated with all the daily business headlines and latest market hype.  Our disciplined, objective investment process emphasizes understanding risk-return relationships and allows clients to invest without the stress levels that typically accompany active management investing.  The fact is that investors generally make bad decisions under the pressure of trying to pick the right stock, when to buy or when to sell. Studies conclude time and again that investors tend to bail out of stock funds during downturns and buy back in too late after the markets have already recovered.  Our proven strategy provides relief to investors who suffer from the emotional burdens of active management.

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