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We construct our globally diversified Disciplined Wealth Portfolios using a multi-factor approach that takes strategic “tilts”, or increased exposure relative to the index, toward risk factors including (but not limited to):
The stock market, the media, and popular culture, by and large, encourage behavior consistent with the belief that the market is inefficient. You must understand that there is a choice to be made about how you believe the market works.
We believe that markets are efficient, so much so that it is one of our Core Values.
A solid component of Free Market Portfolio Theory is Modern Portfolio Theory (MPT), which earned the Nobel Prize in Economics in 1990 for the collaborative work of Harry Markowitz, Merton Miller and William Sharpe.
Essentially, MPT demonstrates that for the same amount of risk, diversification can increase returns. The task is to find assets with an academically proven risk premium and low correlations.
Source: Malkiel, Burton. “A Random Walk Down Wall Street”. 1973Fama, Eugene; French, Kenneth. “The Cross-Section of Expected Stock Returns”. Journal of Finance, 1992