A Note from the CIO

A Note from the Chief Investment Officer
Scott S. Brooks, Gold Coast Financial Group

My first job in this business was on an agency trading desk in 1995, during the dot com mania. I witnessed a lot of different investing styles and studied who built tremendous fortunes and who lost their shirt. I learned some very important lessons in investing that have held true since that first internship. I learned that the big money is made from participating in the big trends. I learned that the most successful investors have a set of rules that are disciplined and unemotional, because a sell discipline is just as important as when to buy. The people that allowed their conviction to get in their way, holding stocks as they continued to fall, would lose money time and time again.

I also learned that nobody likes to lose money. It doesn’t matter if someone is 25 years old, or 75. So I learned that ultra-conservative instruments and cash are viable options during major bear markets – because there is no good reason to be over exposed when the markets are falling and your net worth is diminishing.

If an investment is going down, there is always something going up, staying flat, or going down less.

With those considerations in mind, and the institutional money management available through Compound Planning, we construct our managed portfolios. I’ve never advised a plain vanilla traditional ‘strategic asset allocation’ of stocks and bonds. With the dot com-bomb bear market and the real estate bubble bursting bear market, I don’t know how anyone can choose a 100% passive, fully invested, strategic asset allocation. If an investment isn’t working, I want to actively find something that is working.

I think our team goes well beyond the traditional asset allocation of the commonplace financial advisor group. When I construct a portfolio, I build a portfolio of strategies, where each strategy is managed by a specialist in that category.

  • I want strategies that are based on a disciplined set of rules.
  • I want strategies that look to excel in bull markets and I want strategies that have a history of sidestepping bear markets to preserve capital.
  • I want dynamic, adaptive strategies that have the ability to seek returns in the areas of the markets that are working best.
  • I want to build a dream team allocation of best-in-class management strategies for Strategic investing, Tactical investing, and Hedging, using all of the major asset classes.
  • I want our valued clients to be happy with their performance, and more importantly I want them to sleep well at night.
  • The objective of the comprehensive portfolio design is to create an “all weather” portfolio that can navigate all of the different environments of the various markets.

Beyond the market based strategies, I acknowledge the track records of the college endowments throughout two disastrous bear markets. The large endowments are conspicuously over-weighted in non-traditional investments, more commonly known as alternative investments. For clients that can sacrifice immediate liquidity for an allocation to the non-traded, alternative investment universe, these types of investments help to reduce the correlation to market-based securities, as they are often not traded and not exposed to the daily volatility of the public markets. As well, the illiquidity premium often yields a higher annual distribution.

Please reference my white papers to get a better understanding of my investment philosophies: (1) Active vs. Passive Investing (2) All Weather Portfolio Construction (3) College Endowment Investing. And if you have a better way to invest, I’m open to suggestions. After all, I do “eat my own cooking!”

To learn more about our portfolio construction, please contact Scott Brooks at 949.545.6500.

Gold Coast Wealth Advisors