Investment Philosophy

We have spent more than a decade helping and educating investors. We believe it is common sense that…

Market timing doesn’t work and your goals are the focus

We “do not” employ strategies which engage in individual stock picking, market timing, or other forms of active management.

Plan Focused – Customized Strategies

Frequently, the first question we are asked is “what performance have you had?” We believe the first question we should answer is… How can you help me pursue my goals and be a successful long term investor? By engineering a customized strategy we shift the focus from the noise of investing to your goals.

Academic Science, Not Science Fiction

Often, finance may be viewed as the man behind the curtain or the insider who has superior knowledge or secret information. For decades investors may have been disappointed and disillusioned by this type of investing.


The Strategy…


Passive Management – Passive Doesn’t Mean Lazy

Passive Management is a financial strategy in which an investor (or a fund manager) invests in accordance with a pre-determined strategy or indices. The most popular method of passive management is to mimic the performance of a commercially identified index. The two most popular indices cited are the S&P 500 and the DOW Jones Industrial average. Advocates of unmanaged, passive investing–sometimes referred to as indexing–have long argued that the best way to capture overall market returns is to use low-cost market-tracking index investments. This approach is based on the concept of the efficient market, which states that because all investors have access to all the necessary information about a company and its securities, it’s difficult if not impossible to gain an advantage over any other investor. As new information becomes available, market prices adjust in response to reflect a security’s true value. Proponents of market efficiency say that reducing investment costs is the key to improving net returns.

Although traditional indexing is an effective strategy it allows commercial benchmarks to define your strategy.

Note: Investing in mutual funds involves risk, including possible loss of principal.

All indices are unmanaged and may not be invested into directly. Past performance is no guarantee of future results. 

No strategy assures success or protects against a loss.  

Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.


Good but it can be done better…


Equities – Stocks

The Center for Research and Securities Prices (CRISP), at the University of Chicago, has been conducting research since the 60’s on security returns. The CRISP has provided a data base which has catapulted the field of academic finance. Eugene Fama (University of Chicago) and Ken French (Dartmouth) have used CRISP data to identify specific market factors which have shown to have higher expected return and risk1.

not all risk is worth takingNot All Risk Is Worth Taking.  Returns are the result of the assuming risk.  Gain is rarely accomplished without taking a chance, but not all risks carry a reliable reward.  Over the last 50 years, financial science has brought us to a powerful understanding of the risks that are worth taking and the risks that are not.

Everything we have learned about expected returns in the equity markets can be summarized into three main dimensions:

Market:  Stocks have higher expected returns than fixed income.

Size: Small company stocks have higher expected returns than large company stocks.

Price: Lower-priced “value” stocks have higher expected returns than higher-priced “growth” stocks.

Relative performance in fixed income is largely driven by two dimensions: bond maturity and credit quality.  Bonds that mature farther in the future are subject to risk of unexpected changes in interest rates.  Bonds with lower credit quality are subject to the risk of default.  Extending bond maturities and reducing credit quality increases potential returns, while increasing risk.

diversification inv ph

Diversification is Key.  Through the proper use of asset allocation, volatility can be reduced to a level that is appropriate for you, while still empowering you to reach your long-term goals.

Note: Asset allocation does not ensure a profit or protect against a loss. 






Sweeten Wealth Management (SWM) uses a multifactor approach that incorporates both size and value measures—and exposure to non-US markets—in an effort to increase expected returns and reduce portfolio volatility. A potential way to capture these effects is through portfolio structure.



Fixed Income – Bonds


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Relative performance in fixed income is largely driven by two dimensions: bond maturity and credit quality. Bonds that mature farther in the future are subject to the risk of unexpected changes in interest rates. Bonds with lower credit quality are subject to the risk of default.

Extending bond maturities and reducing credit quality increases potential returns, although these returns come with higher volatility, as measured by standard deviation.

By understanding the dimensions of risk in the bond market, investors may better determine their risk/return profile and estimate the total risk exposure necessary to pursue their expected return goals. Investors seeking the greater expected returns of stocks may choose to focus on equities and keep their bond portfolio short and high in quality. Investors who prefer the lower risk of fixed income can still target higher expected returns by holding bonds with slightly longer maturities and slightly lower credit quality.

If a portfolio has a high standard deviation, its returns have been volatile; a low standard deviation indicated returns have been less volatile. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.



Asset Allocation – Modern Portfolio Theory (MPT)

In the 1950’s Harry Markowitz found that combining securities into a portfolio allowed the expected risk and return as a whole to be defined. Research has shown 90% of the variation in portfolio return is explained by asset allocation decisions. The decision therefore is to determine how much equity exposure to have versus fixed income.

Note: Asset allocation does not ensure a profit or protect against a loss.



Dimensional Funds Advisors (DFA) – Preferred Strategy

Sweeten Wealth Management is among a select group of firms that is qualified to offer access to DFA. DFA manages mutual funds for long-term investors. One of the cornerstones of their approach is a client base committed to their investments through all market cycles, both good and bad. Buy-and-hold investors enable them to keep turnover and transaction costs low, which add to their bottom line.

  • DFA employs decades of research to construct funds according to defined equity asset classes based on security market capitalization and Book-To-Market.
  • DFA constantly reviews the securities within a defined fund to ensure clarity of strategy and portfolios.
  • Careful trading and securities lending reduces cost within the fund.
  • Works with Advisors to provide a disciplined and cost effective solution to construct portfolios.
  • A globally diversified DFA portfolio may hold over 10,000 securities and may have over 27 different asset classes.

Security Market Capitalization
Market Capitalization refers to the market value of a company’s outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding.

‘Book-To-Market Ratio’
A ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm’s historical cost, or accounting value. Market value is determined in the stock market through its market capitalization.

Investing in mutual funds involves risk, including possible loss of principal.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and, if available, the summary prospectus contain this and other important information about the investment company. You can obtain a prospectus and summary prospectus from your financial representative. Read carefully before investing.


How is it all done?


Become Our Client

Prudent investing is a rational process. It involves deciding how much risk to take, then choosing asset classes to match an investor’s preferred risk-return tradeoff.

Once you become a client:
We will provide you with a custom tailored investment portfolio designed around your specific financial situation and goals.

We will determine your tolerance for risk and make recommendations that work toward the goal of reducing risk without reducing returns using the Fama/French multi-factor models and Harry Markowtiz’s Modern Portfolio Theory.

We will focus on diversification and expanding the number of asset classes in your portfolio.

We will focus on low-cost investments that are not actively managed (frequently bought and sold securities in an attempt to beat their benchmark), which may help reduce turnover, expense ratios and overall cost of the portfolio.

We will focus on the long term. We will use the science of investing to alleviate the emotion involved with getting in and out of the market during market cycles.

We will maintain asset allocation with quarterly rebalancing. Rebalancing is an essential component of any comprehensive investment strategy and will help you avoid undue shifts in your portfolio due to financial market trends resulting in risk outside of your desired investment objective.

Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level of asset allocation.

Asset Allocation does not ensure a profit or protect against a loss.

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal.



1. Eugene F. Fama and Kenneth R. French. “The Cross Section of Expected Stock Return.” Journal of Finance. June 1992, Vol. 47, Issue 2. P 427-465. Web Ebsco. July 29, 2013

2. Roger G. Ibbotson and Paul D. Kaplan. “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?” Financial Analysts Journal. Jan-Feb 2000, Vol. 56, No.1. P 26-33. Web Ebsco.July 29,2013