Investment strategy FAQs

Each portfolio follows an investment strategy that is decided in advance and is outlined in a written document. You are hiring Portfolio Solutions to manage your accounts day-to-day according to this plan. As such, you will not be hassled by calls seeking permission to do routine transactions or other portfolio maintenance. If you have questions about something that occurred in your account, simply contact us by phone or email.

Charles Schwab will notify you by mail or email each time Portfolio Solutions makes a trade in your account. All trades are conducted in accordance with  your written Investment Policy Statement. You do not need to contact anyone when you see a trade has been made. Please contact us if you have a question about a trade.

We have spent over a decade studying and selecting index funds and ETFs that are used in all portfolios. However, the percentage allocated to each fund may differ from client to client depending on the needs of each client. In addition, taxes may affect which investments are selected for taxable accounts. Some asset classes are not suitable for investors who are in a high tax bracket.

No two indexes are created equal and no two index funds or ETFs are managed in exactly the same way. We analyze the underlying structure and range of each fund to find the ones that best represent each asset class in a portfolio. Costs are important, however the funds we select are not always the lowest cost funds. Rather, they best cover a particular area of the market. For example, in a couple of niche investment styles we use DFA funds that are considerably higher cost than index funds.  For more information, please read All About Index Funds.

We compare all portfolio allocations to their fixed strategic targets on an ongoing basis. Portfolios are looked at for possible rebalancing when their asset allocation is out of sync with target by a predetermined range. A decision to rebalance will depend on the dollar amount to be reallocated, known expected future contributions or withdraws, and the potential tax consequence in a taxable portfolio.

Taxes are an investing expense and we use several techniques to help control taxable events. First, the fixed income securities selected for a high tax bracket Client consist of tax-free bonds rather than taxable bonds. Second, there are no REIT funds in a taxable account because they distribute a large amount of ordinary income each year. Third, we practice tax-loss harvesting through tax-swapping. This practice generates tax losses that can be used to offset gains and other income. See this article to learn more.

Clients that are in a high federal income tax bracket generally should substitute tax-free municipal bonds for taxable bonds in their taxable portfolio. That will result in the highest after-tax income with the least amount of risk. We use either low-cost municipal bond mutual funds or individual municipal bonds depending on the client’s state of residence and the amount to be invested. Bonds that are subject to AMT are not used.

As fiduciaries, we adhere to the strictest performance reporting standards. Each client receives a personal quarterly performance report benchmarked to their investment policy. While we do calculate composite performance information on all portfolio strategies, we do not publish this data in the public domain because these composite results have not been verified by an independent third party.