Forward-Looking Returns White Paper

A “Smart, But Humble” Approach for Using Fundamentals to Shape Expectations

Forward-Looking Returns Executive Summary

Life is a series of trade-offs. In order to get something, you have to give something up. These common phrases apply to many areas of life but they can also be applied to investing. Most investors know that they have to sacrifice some safety and take on risk to achieve better returns. Modern Portfolio Theory (MPT) tries to make the most of that trade-off. It provides a framework for evaluating how we can maximize return while minimizing risk.

Just as a personal trainer takes athletes and provides them with a nutrition and a training schedule to increase results and minimize injury, the same concept can be applied to investing. The trainer is familiar with nutrition labels, effective workouts, and the newest equipment to slowly and surely realize that their efforts are paying off. Implementing this framework doesn’t show drastic results overnight, but as sound principles are consistently applied over time, desired results begin to take shape.

This analogy can be applied to investing. When the framework is applied over the long term, we start to see the desired outcomes. This framework includes using our fundamentals-based methodology for forward-looking return estimates and applying those estimates in the portfolio construction and financial planning processes for our clients. This paper provides a summary of how and why we developed our methodology, case study examples, and how we put those returns to work.