Our Investment Discipline
TCM's investment discipline is based on the concepts of avoiding large losses, reducing volatility and minimizing the risk of significant relative under-performance, also known as tracking error or active management risk. We pursue this discipline through a number of initiatives.
First, all of our portfolios are properly diversified. Only through adequate diversification can one participate in long-term wealth creation without the risk of permanent substantial loss. To use a baseball analogy, we try to hit singles and doubles, not swing for the fence.
Second, we adhere to the Efficient Market Theory, which postulates that because of the vast amount of information instantly available to everyone, it is virtually impossible to consistently exploit inefficiencies in pricing. This means we do not buy into the herd mentality leading investors to chase relative performance through high-turnover, expensive and often under diversified active management strategies. We believe the markets' returns are sufficient to create wealth without taking the additional risk of significant under-performance, tax-inefficiencies, and added costs inherent in many actively managed strategies. Our investment strategy is commonly referred to as Active Indexing.
Third, we believe in periodically re-balancing portfolios in-line with their Strategic Asset Allocation policy. We do this, not to enhance return, but in an attempt to reduce risk.
First, all of our portfolios are properly diversified. Only through adequate diversification can one participate in long-term wealth creation without the risk of permanent substantial loss. To use a baseball analogy, we try to hit singles and doubles, not swing for the fence.
Second, we adhere to the Efficient Market Theory, which postulates that because of the vast amount of information instantly available to everyone, it is virtually impossible to consistently exploit inefficiencies in pricing. This means we do not buy into the herd mentality leading investors to chase relative performance through high-turnover, expensive and often under diversified active management strategies. We believe the markets' returns are sufficient to create wealth without taking the additional risk of significant under-performance, tax-inefficiencies, and added costs inherent in many actively managed strategies. Our investment strategy is commonly referred to as Active Indexing.
Third, we believe in periodically re-balancing portfolios in-line with their Strategic Asset Allocation policy. We do this, not to enhance return, but in an attempt to reduce risk.