How does AssetGrade invest?

AssetGrade takes a sensible approach to investing, based on years of experience.  We are not seeking the latest hot stock, instead we build well-diversified and well-balanced portfolios aligned with our clients’ needs.  Our investment approach has passed the acid test, as our clients include people with decades of experience in the investment industry.

After working with our clients to understand their needs, goals and financial situation, we design a customized portfolio comprised of best-in-class mutual funds and ETFs chosen from over 10,000 funds across hundreds of fund companies.

We work with our clients for goal-based investing and/or asset-liability matching - aligning their investment assets with their goals, as well as their existing and expected liabilities, taking into account the level of risk that the clients are comfortable taking on and the level of risk for their job/income.  The outcome from this work is a target asset allocation across the clients’ investment accounts.  For example, having 50% in US stocks to be held in a taxable brokerage account, 5% in emerging market stocks in an IRA, etc.

The next step is to choose the specific investments for each asset class, typically a mutual fund or ETF.  To do so, we choose the best-in-class funds based on the following criteria:

  • Percentile ranking by Morningstar category – how the funds have done compared to other funds
  • Manager tenure – how long the fund managers have been managing these types of investments
  • Expense ratio – how much the fund company charges

Our investment philosophy is comprised of the following three pillars:

  • Limited tactical asset allocation – not trying to time the market, since most people have not been able to do so consistently over time.  We stick to a long-term approach by focusing on the target asset allocation.
  • Passive investing (index funds or ETFs) where it makes sense, such as large-cap US stocks, and active investing (non-index funds) for areas where managers have had more success beating the benchmark, such as high yield bonds.
  • Portfolio rebalancing regularly, which forces buying low and selling high.  This is hard for most folks to do, since emotionally most of us are wired to do the opposite.