Our Approach

What We Believe

Woodstone's Core Investment Principles

Our approach to investing is guided by a set of core principles.  These principles are deliberate and understandable.  They are not overly complex in theory, or in practice.  We believe that anyone can invest by following these principles, but we believe that investor behavior will ultimately determine outcomes. Learn more about our other core principles.

1.

Markets Absorb Information Well

The market is an effective, information-processing machine. Millions of participants buy and sell securities in the world markets every day, and the real-time information they bring helps set prices effectively ($462.8 Billion Daily average for world equity trading in 2018).

Embrace market pricing, don’t pit yourself against the collective knowledge.

2.

Don’t try to outguess the market

The market’s pricing power works against mutual fund managers who try to outsmart other participants through stock picking or market timing. As evidence, only 19% of US equity mutual funds have survived and outperformed their benchmarks over the past 15 years.

3.

Resist chasing past performance

Some investors select mutual funds based on past returns. However, funds that have outperformed in the past do not always persist as winners. Past performance alone provides little insight into a fund’s ability to outperform in the future.

4.

Let markets work for you

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and, historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

5.

Consider the drivers of returns

Academic research has identified various dimensions of equity and fixed income investments which demonstrate differences in expected return. These dimensions are pervasive, persistent, and robust and can be pursued in cost-effective portfolios.

6.

Practice smart diversification

Diversification helps reduce risks that have no expected return, but diversifying within your home market is not enough. Global diversification can broaden your investment universe.

Percent of world equity market capitalization as of December 31, 2018

7.

Avoid market timing

You never know which market segments will outperform from year to year. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

8.

Manage your emotions

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions at the worst times.

9.

Look beyond the headlines

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future while others tempt you to chase the latest investment fad. When tested, consider the source and maintain a long-term perspective.

10.

Focus on what you can control

A financial advisor can create a plan tailored to your personal financial needs while helping you focus on actions that add value. This can lead to a better investment experience.

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

Diversification does not eliminate the risk of market loss. There is no guarantee investment strategies will be successful. This information is for illustrative purposes only. See below for additional exhibit information and important disclosures.

Disclosure

Exhibit 1:

In US dollars. Global electronic order book (largest 50 exchanges). Source: World Federation of Exchanges.

Exhibit 2:

The sample includes funds at the beginning of the 20-year period ending December 31, 2018. Each fund is evaluated relative to its respective primary prospectus benchmark as of the end of the evaluation period. Surviving funds are those with return observations for every month of the sample period. Winner funds are those that survived and whose cumulative net return over the period exceeded that of their respective primary prospectus benchmark. Loser funds are funds that did not survive the period or whose cumulative net return did not exceed that of their respective primary prospectus benchmark. Where the full series of primary prospectus benchmark returns is unavailable, funds are instead evaluated relative to the Morningstar category index assigned to the fund’s category at the start of the evaluation period. US-domiciled open-end mutual fund data is from Morningstar. Source: Dimensional Fund Advisors LP

Exhibit 3:

This study evaluated fund performance persistence over rolling periods from 1999 through 2018. Each year, funds are sorted within their category based on their previous five-year total return. Those ranked in the top quartile (25%) of returns are evaluated over the following five-year period. The chart shows the average percentage of top-ranked equity and fixed income funds that kept their top ranking in the subsequent period. US-domiciled open-end mutual fund data is from Morningstar. Source: Dimensional Fund Advisors LP

Data Source (Exhibits 2 and 3):

The US Mutual Fund Landscape 2015, Dimensional Fund Advisors LP. US-domiciled mutual fund data is from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago. Benchmark data provided by MSCI, Russell, and S&P. MSCI data © MSCI 2015, all rights reserved. Russell data © Russell Investment Group 1995–2015, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. Benchmark indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Diversification neither assures a profit nor guarantees against a loss in a declining market. Source: Dimensional Fund Advisors LP

Exhibit 4:

In USD. US Small Cap is the CRSP 6–10 Index. US Large Cap is the S&P 500 Index. Long-Term Government Bonds is the IA SBBI US LT Govt TR USD. Treasury Bills is the IA SBBI US 30 Day TBill TR USD. US Inflation is measured as changes in the US Consumer Price Index. CRSP data is provided by the Center for Research in Security Prices, University of Chicago. S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Long-term government bonds and Treasury bills data provided by Ibbotson Associates via Morningstar Direct. US Consumer Price Index data is provided by the US Department of Labor Bureau of Labor Statistics. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.Source: Dimensional Fund Advisors LP

Exhibit 5:

Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. Profitability is a measure of current profitability, based on information from individual companies’ income statements.

Exhibit 6:

In US dollars. Market cap data is free-float adjusted and meets minimum liquidity and listing requirements. Dimensional makes case-by-case determinations about the suitability of investing in each emerging market, making considerations that include local market accessibility, government stability, and property rights before making investments. China market capitalization excludes A-shares, which are generally only available to mainland China investors. Many nations not displayed. Totals may not equal 100% due to rounding. For educational purposes; should not be used as investment advice. Data provided by Bloomberg.

Exhibit 7:

In US dollars. Chart is for illustrative purposes only. Index descriptions for asset groups: US Large Cap is the S&P 500 Index, provided by Standard & Poor’s Index Services Group. US Large Cap Value is the Russell 1000 Value Index. US Small Cap is the Russell 2000 Index. US Small Cap Value is the Russell 2000 Value Index. Russell data © Russell Investment Group 1995–2015, all rights reserved. US Real Estate is the Dow Jones US Select REIT Index, provided by Dow Jones Indexes. International Large Cap Value data provided by Fama/French from Bloomberg and MSCI securities data. International Small Cap Value data compiled by Dimensional from Bloomberg and Style Research securities data. Emerging Markets is the MSCI Emerging Markets Index (gross dividends), © MSCI 2015, all rights reserved. Five-Year US Government Fixed is the Barclays Capital Treasury Bond Index 1−5 Years, formerly Lehman Brothers, provided by Barclays Bank PLC. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

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