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    Tahoe Portfolio Strategy 

Diversification: Individual security variation favors portfolio construction that includes diverse ETF securities which have a correlation of less than 1, and the underlying companies in an ETF participate in multiple economic sectors. Securities selected should also show above average growth in their book value versus their benchmark.  Favoring value over growth generally is a focal point.


Benchmark: Large Cap portfolio manager's investment performance is measured against an applicable benchmark such as the S&P 500


The S&P 500 index represents a strong barometer for the U.S. economy.  Larger companies within the S&P 500 Index influence its performance more than smaller companies because the Index is market capitalization weighted.


Large v. Small:  Small companies have better growth potential versus larger companies based on the law of large numbers, underlying consumer economic activity, and long-term growth of an economy.  Allocating a portion of the portfolio to equally weighted S&P 500 constituents versus the S&P 500 Market Capitalization adheres to a Small vs. Large concept.


Margin of Safety:  Create a portfolio that provides an overall margin of safety greater than the S&P500 Index. The portfolio seeks to identify on an aggregate basis securities that provide a store of value greater than the S&P 500 Index.  Overweighting between value or growth, or specific sectors is relevant.  Because securities/ETF's have a correlation of less than 1, the margin of safety for each security varies over time.  Based on the laws of large numbers, no security/ETF is able to consistently outperform the market.  Therefore, a portfolio should consider rotating over the long-term between securities/ETF's, while being tax efficient, to maintain a greater margin of safety relative to the S&P 500 to achieve outperformance over a particular time horizon.


Time Horizon: Defined rebalancing period leads to consistent portfolio construction and review of potential opportunities in the marketplace.


Long-Run Security Performance:  Individual securities/ETF's outperformance versus the S&P 500 Index diminishes across time based on the law of large numbers.  The law of large numbers essentially means the larger a company becomes the harder it is to outperform the index, as its activity reverts to the long-run growth rate of the economy that it operates in.


Earnings: ETF valuation has a rational relationship to the future earnings potential of its underlying companies.


Macroeconomic Events: Events can influence a portfolio positively or negatively, but essentially provide an equal opportunity environment for each company in an ETFU


Monetary Policy: The Federal Reserve’s dual mandate of moderate inflation and full employment leads to a nominal increase in asset prices overtime.  


Fiscal Policy: Consistent fiscal budget deficits force the Federal Reserve to maintain its moderate inflation mandate and reduces the net negative effect of the United States existing National Debt overhang.  


Growth: Capitalism and government policy lead to real growth and nominal growth.


Analytics: Review of potential available ETF/security opportunities in the market place.  Understanding of security behavior and variation over time leads to dynamic probability analysis and solutions.



*Client Specific Strategies are available.    



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