Where Smart Money Goes.®
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Where Smart Money Goes.® |
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Investment Philosophy Karmikel Investments utilizes modern portfolio theory and believes in efficient markets. Modern portfolio theory (MPT), according to Rudd and Chasing[1], takes a scientific approach, combines it with academic research and applies it to investing in a way that maximizes expected returns for a given level of risk that an investor assumes. MPT was founded by Harry M. Markowitz and Professors Cootner and Fama in their pioneering research. Harry M. Markowitz[2] was the first to develop an approach for selecting an optimal portfolio that provides the greatest expected return for a level of risk an investor is willing to assume. Cootner[3] and Fama's[4] empirical research on stock price movements (commonly known as the random walk hypothesis) simply states that each successive security price movement is independent from the prior movement and cannot be reliably predicted. The random walk hypothesis is the basis of the efficient market theory which states that, at any given time, a security price contains all relevant information, is accurately priced, and therefore abnormal gains cannot be consistently achieved. As such, Karmikel Investments develops efficient portfolios based on modern portfolio theory and applies probability theory to reduce our clients' risks (standard deviations) through diversified asset allocations. Our fees are low because we do have to pay for exhaustive research on stock picking or timing since we do not believe abnormal gains can be consistently achieved beyond random chance. Our accounts are managed in a structured style to reduce trading costs and enhance our clients returns. Footnotes: 1 Andrew and Henry K. Clasing, Jr., Modern Portfolio Theory (Andrew Rudd, 1988). 2 Harry M. Markowitz, Portfolio Selection: Efficient Diversification of Investment (New York: John Wiley & Sons, 1959). 3 Paul Cootner, The Random Character of Stock Market Prices (Cambridge, Mass: MIT Press, 1964). 4 Eugene F. Fama, "The Behavior of Stock Price Market Prices", Journal of Business, January 1965, pp. 34-105.
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Active vs. Structured Management Wealth Transfer, Legacy Planning & Charitable Giving
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