Investment Philosophy

Clients come first

  • As an RIA, ELC Advisors adheres to the fiduciary standard
  • No misaligned incentives, as with broker dealers

Data-driven philosophy: invest in passive management for better, sustained results

  • Passive management consistently outperforms active management by all measures

Low fees deliver value to clients

  • ELC Advisors charges 0.25% – 0.40% vs. >1% from most wealth managers
  • Low fees drive greater client returns

Customized asset allocation

  • Truly understand the needs and goals of our clients
  • Build transparent, liquid and simple portfolios that meet client objectives
  • Maintain capital discipline through turbulent markets

Every year investors pay billions of dollars to financial advisors and fund companies who claim they can achieve superior returns.  This claim is not supported.  Few advisors, if any,  have the skills needed to beat the markets, and those few people cannot be identified in advance.  Nor does any out-performance persist over time.  Every academic study on the subject points to one clear message; in aggregate the more you pay to invest, the lower your returns will be. Our clients do not participate in the massive wealth transfer from Main Street to Wall Street. They earn their fair share of market returns by holding a select basket of low-cost index funds and exchange-traded funds (ETFs) that match market  performance. After seeing the inner workings of large and boutique investment banks, there is no question this is the best method. ELC Advisors, LLC is a leader in low-cost portfolio management.  For a small annual fee, we will design, implement and maintain a low-cost, passively managed portfolio that is appropriate for your needs. Our services are economical, efficient and practical.

Active Versus Passive

There are two options a person can choose when managing an investment portfolio; active management and passive management. Active management is the belief that a person can achieve superior returns over market indexes. In contrast, passive management is all about achieving, as close as possible, the returns of the financial markets. Passive investors understand that market returns are good returns. The desire to beat the market is a powerful force and investors will spend a considerable amount of time and money searching for superior returns. That search is promoted by a multi-billion dollar Wall Street marketing campaign that employs an army of highly compensated salespeople. Despite all the time and money spent trying to identify ways to beat the markets, the net result falls far below expectations. Very few mutual funds, hedge funds, private equity funds or investment advisors are able to achieve superior performance with enough consistency to make it worth the effort. After paying fund fees, advisor fees, taxes, broker commissions and other related investment costs, an investor’s return typically falls well below the market.  Spending time and money trying to beat the market with active management is counterproductive.

Asset Allocation

Capital markets are composed of different types of asset classes. Asset allocation involves dividing an investment portfolio among different asset classes based on an investor’s financial requirements. The right mix of asset classes in a portfolio provides an investor with the highest probability of meeting their need. Each asset class selected has a long-term expected return over inflation, known as the ‘real’ return. A diversified portfolio will include U.S. and foreign common stock, real estate (REITs), as well as different bond components. Asset allocation is the most important investment decision an investor will make in their portfolio because it explains most of the risk and return.  A fundamental justification for asset allocation is the notion that different asset classes offer returns that are not perfectly correlated, hence diversification reduces the overall risk in terms of the variability of returns for a given level of expected return. Asset diversification has been described as the only free lunch you will find in the investment game. Academic research has painstakingly explained the importance of asset allocation and the problems of active management. Some things to consider during asset allocation:

  • Tax efficient fund placement
  • Investors’ risk tolerance is not knowable ahead of time.  One must make a realistic assessment of risk tolerance.
  • The long-run behavior of asset classes does not guarantee their shorter-term behavior.
  • Most asset allocation decisions fail to consider the effects of home-ownership, membership in pension plans, ownership of annuities, exposure to the economy through a job, the existence of mortgages and debts.