Investment Process

A long-term strategy tailored to your needs.

Level Financial team members.

Why do we invest? It’s a simple question that invites wrong answers. Why bother to put your money at risk in the investment markets? To get rich? Because everyone else is doing it? To keep up with your neighbors?

No, these are not rational answers. At Level Financial Advisors, we invest in order to protect and increase your future purchasing power. To state it simply, inflation is the enemy and diversified investing is the defense.

Inflation Reduces Value

Inflation is a leech that sucks the life out of our cash assets. Over time it steadily erodes the value of an unprotected nest egg.

This chart shows how the real purchasing power of a $50,000 fixed pension payment is gradually decreased by a 3.5 percent annual inflation rate.

Inflation chart

After 30 years the pension can purchase only a fraction of the goods and services it commanded on the first day of retirement. A diversified portfolio that includes investments with the potential to grow as fast or faster than inflation can preserve and increase your purchasing power, helping you to achieve your goals, whether they be a sound retirement, an education for your children, or some other long-term goal.

Please Also Note: Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by Level) or any planning or consulting services, will be profitable, equal any historical performance level(s), or prove successful

Stocks, bonds, convertibles, money markets, REITS—it is easy to get confused by all of the investment choices out there. It is pretty easy, however, to see the entire investment world as divided into two types of assets—loans and equity.

Loans allow you to receive interest and repayment of your principal. You give up use of your money for a set period, someone else uses it, and they pay you a premium in recompense. Loans include all fixed- and adjustable-rate instruments: Bonds, certificates of deposit, money market funds, U.S. Treasuries, mortgages, savings accounts, savings bonds, notes, and the like.

In general, these are lower risk and lower-return investments. In the best cases investors recover their original stakes plus a pre-agreed premium payment for the use of their money.

Equity is an ownership interest in an enterprise or in real estate. Common stocks are ownership interests in the companies that issue them. Real estate investment trusts offer ownership interest in commercial real estate properties. Equity allows the investor to participate in the growing value of a company, a piece of real estate, a commodity such as oil or gold, and a collectible such as a piece of art or rare antique.

Equity ownership is riskier. Prices can fluctuate sharply in short periods of time. It can also be more rewarding over time. Investors may be paid rents from property and dividends from businesses on a regular basis, and they participate in the growth in value of their equity investments over time. Consequently, equity investments are more rewarding and are the only instruments that can keep up with—and even exceed— the rate of inflation.

Level Financial uses both of these asset classes in its client portfolios.

Market timing has fascinated professional investors since financial markets began. The idea is simple: keep your money invested while markets are rising, pull it out just before they fall, and put the money back in before they rise again.

There is a problem with this approach: No one has ever demonstrated an ability to do this consistently. At best they get out after the market has fallen (thereby locking in their losses) and get back in after it has started rising, while missing the early—and often large—gains.

Study after study has shown that professional and amateur investors alike shoot themselves in the foot when market timing. Large scale studies of individual investment accounts found that the returns on those accounts were less than would have been earned by a passive, buy-and-hold strategy. In other words, because investors traded in and out of the markets at the wrong times they did not earn as much as they could have.

Stock markets rise in value during most years. During the year they rise an average of 64 percent of the time. From 1970 through 2015 the S&P 500 Index rose during 36 years and fell during 10. Investors who sit tight during down markets will be amply rewarded with returns that make up for the declines and take their portfolios to new heights.

Buy-and-hold investors also avoid incurring excessive transaction charges. In non-retirement accounts, they delay paying taxes on capital gains.

Level financial does not practice market timing. We find that by staying fully invested, while periodically rebalancing portfolios back to their original allocations, helps us to capture the markets’ positive returns over time.

We offer five portfolios with varying levels of volatility and potential reward.

Those with smaller amounts of equity investments (which include stocks, commodities, and commercial real estate) and with higher levels of fixed income will generally have less volatility and lower returns. Notice that these portfolios can still be volatile—they will go down when the stock market falls, although they usually do not drop as much as the markets. These portfolios are suitable for investors with shorter investment horizons or who are afraid to take a great deal of risk.

Higher risk = potential higher returns

Portfolios with higher levels of equity investments have greater potential to earn returns in excess of inflation over extended periods of time. However, over the short term, they can decline dramatically. An investor must be prepared to withstand periodic downturns that can include temporary double-digit losses.

All of the portfolios will offer some level of income. Those with larger investments in fixed income will earn primarily bond interest, while those with larger investments in equities will earn primarily stock dividends and income from commercial property rentals.

We will help you select the allocation that is right for you and then help you stick with your investment program.

Open-end mutual funds are the ideal choices for individual investors. They offer expert management. low costs. and broad diversification.

A mutual fund is an investment company closely regulated by the Securities & Exchange Commission. It pools money from thousands of individuals and then invests in individual securities according to its stated objective. For a small initial investment an individual investor can own hundreds or thousands of securities. Duplicating one average mutual fund’s diversification would require an investor to ante up millions of dollars and to pay numerous transaction charges.

The mutual funds we use are open-ended. meaning that they continuously offer to sell new shares or to redeem shares at market values. They are liquid, you can sell shares on any business day and receive that day’s prices. We use mainly institutional mutual funds. They differ from retail funds in that they are not sold directly to the public, but only to institutions (such as pension funds and insurance companies) and to the clients of independent investment advisors like Level Financial.

Such funds avoid retail marketing costs and therefore have extremely low operating costs. They are usually more tax-efficient because they are not subject to frequent trading by unsophisticated individuals.

Level Financial Advisors will build a portfolio of mutual funds for you that will capture the returns of thousands of stocks. bonds. and commercial real estate projects from around the world.

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