Investment Philosophy

Purpose Wealth follows an investment philosophy built upon the efficacy of the capital markets. Our goal is to capture returns driven by the dimensions of systematic risk - returns that are there for the taking.

The sensible approach is control what we can (e.g., behavior, costs, diversification, and risk exposures), while ignoring the ever-present noise in the media.

Principles:

• Risk and expected return are directly related.
• Diversification is essential.
• Portfolio structure determines performance.
• Markets, not managers, produce returns.
• Performance is inversely related to cost.

Active vs. Indexing vs. EBI

Equilibrium-Based Investing (EBI), a passive strategy that helps clarify the debate between active and passive investment management, provides the foundation of our philosophy.

Active Management:

• Emphasis on security selection and market timing.
• Undermines asset class exposure to keep up with “promising” securities.
• Generates higher fees, trading costs, and tax consequences due to increased turnover.

• Emphasis on asset class returns.
• Commercial benchmarks define strategy.
• Sacrifices transaction costs and turnover in favor of tracking benchmarks.

Passive Management - Equilibrium-Based Investing:

• Emphasis on returns driven by dimensions of risk identified by academic research.
• Financial science and economic logic define strategy.
• Minimizes transaction costs and enhances returns through trading and engineering.

We utilize passively-managed, low-cost portfolio components. Portfolios are comprised of open-end mutual funds and exchange-traded funds (ETFs), typically from Dimensional Fund Advisors (DFA), The Vanguard Group, Barclays Global Investors, and State Street Global Advisors.

Equilibrium-based "Core" funds from DFA typically serve as the primary component for the equity asset classes of our portfolio recommendations. Index funds, primarily from Vanguard, are typically used for asset class exposures where equilibrium-based funds are either not available or not appropriate.