In the world of investing there are two ways to manage your money.  The first of which, and the most popular, is Traditional Portfolio Theory.  This approach involves the belief that we can pick the good stocks while avoiding the bad, and get in and out of the market at just the right time. In other words, it is the belief that we have a crystal ball that can show us the future.

The second way to manage your money is through Modern Portfolio Theory (MPT).  This is a passive asset management approach.  It is based on strict academic research and holds the belief we cannot predict the future investment world, just as we cannot predict anything in life.  MPT is a long-term buy-and-hold strategy that is based on proper asset allocation instead of stock picking and market timing.

It is very difficult to build a portfolio around MPT because most fund companies do not give retail investors the right tools.  Conventional index fund strategies have missed the mark on what it means to achieve market rates of return.  By utilizing DFA funds in our portfolios, we are able to capture returns that conventional index funds do not.  DFA funds do not track indexes.  Rather, they cover asset classes, one of the many factors that lead to their long term success.

Please note the key differences in the chart below.
 Traditional Portfolio Theory   Modern Portfolio Theory
  • Active Management
  • Stock Picking
  • Market Timing
  • High Turnover
  • Expensive
  • Non Tax Efficient
  • Corporate America
  • Passive Management
  • Asset Allocation
  • Efficient Markets
  • Low Turnover
  • Inexpensive
  • Tax Efficient
  • Academically Base

Glenn Seabolt    ▪    6764 Autumnwood Drive, Nashville, TN 37221   

 

Phone: 615-483-8919     ▪    Fax: 615-662-3510     ▪    Email: GSeabolt@SeaboltCapital.com

Securities offered through NFP Securities, Inc., A Broker/Dealer and Member NASD/SIPC Investment Advisor Services offered through Modern Portfolio Management, Inc. a Federally Registered Investment Advisor. Modern Portfolio Management Inc, is an affiliate of NFP Securities, Inc and a subsidiary of National Financial Partners Corp., the parent company of NFP Securities, Inc. This site is published for residents of the United States only. Registered representatives and investment advisor representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.