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The third principle to our foundation for investment management is to properly implement the portfolio and then focus on what we are able to control.

Based upon our first two principles, a properly-implemented investment strategy will be based upon academic research about the markets and expected returns. This results in a portfolio that strives to emphasize areas of the market with higher expected long-term return potential.

The approach is similar to indexing, given the emphasis on keeping expenses as low as possible and having low turnover to limit trading costs, yet it is not limited to securities within a commercially-defined index. It is a fundamentally different approach than conventional, “active” investment management as there is no attempt to identify “mispriced” securities, or any reliance upon forecasts of “undervalued” securities or sectors of the market. Click here to learn how this is actually implemented.

The next step for proper implementation is making sure the right investments are in the right accounts from a current tax law and personal tax situation. This can only be determined in light of your financial plan.

Investing according to these principles allows time to focus on what you can control. No one is able to control the market and it can be dangerous to your financial future to try. The focus should be on controlling your behavior with your portfolio and then implementing financial planning strategies and engaging in opportunities that are fully in your control.

Investing involves risk including loss of principal. No strategy assures or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.