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INVESTING AT BTG:  OUR PHILOSOPHY

Simply put - At BTG we believe the goal of a portfolio manager should be to capture the returns that the market provides.  

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All too often we come across investors with portfolios that are overly diversified, inefficient, and not customized to that individual's needs.   

 

After nearly a decade of managing investment portfolios and seeing first-hand how different firms and institutions manage wealth, we've developed an investment model that is specifically designed for the retiree, and one that works. 

What We Buy: 

Equities:  Low-cost, broad-based ETFs and stock mutual funds.


Fixed Income:  Bond mutual funds, CDs, individual Treasuries, and money markets.




What We Don't Buy: 

Equities:  Individual stocks.

Fixed Income:  Emerging market debt, absolute return funds, individual high yield bonds.

Other:  Annuities, commodities, illiquid REITS, alternative investments.




Asset Class Emphasis:
 

  • We have a strong bias for US equities over international equities.

  • We tend to overweight large cap stocks and underweight small cap stocks.

  • We focus on investment-grade bonds and limit our exposure to high yield bonds.

  • We buy CDs and Treasuries to lock-in interest rates and income, and construct ladders in coordination with our clients’ distribution needs.

BTG's Bucket Strategy

The Concept:  Our clients are primarily retirees, and we help them recreate a paycheck from their assets to support their retirement.  Because our clients are in distribution it’s critical that we construct their portfolios that are:

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1.  Customized to their spending needs.

2.  Prepared to protect against market corrections and recessions.

3.  Structured in a way that promotes future growth to support a long retirement. 

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The Strategy:   We view the Investment Portfolio in terms of three separate Buckets.  Each Bucket has its own specific purpose, time horizon, and investment selection.  

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                   Bucket 1:  Provides a consistent monthly paycheck for the spending needs.

                                         *Investment Used:  CDs, Treasuries, Money Markets, cash.

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                    Bucket 2:  Generates income to replenish Bucket 1, and creates an                                                       additional layer of protection.

                                          *Investment Used:  Bond mutual funds.

                                

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                    Bucket 3:  Promotes long-term growth that is required to maintain the                                               client's wealth and defend against future inflation.

                                          *Investments Used:  Equities.

                            

                                            

                                  

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Client Example

Clients:  Larry and Susan Collins

Ages:  67 and 65

Portfolio Value =  $1,000,000

Investment Allocation:   60/40

Annual Withdrawal Needs =  $50,000 (5%)

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BUCKET 2:  Bond Funds  (20% of Portfolio)

Bond Interest replenishes Bucket 1

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* START HERE *

BUCKET 1 : Risk-Free Assets  (20% of Portfolio)

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Bucket 1 Investment Structure:

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$50k - Money Market Fund

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$50k - 1 YR CD

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$50k - 2 YR CD

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$50k - 3 YR CD

BUCKET 3: Equities (60% of Portfolio)

Stock Dividends and Profits from
Rebalancing replenish both Buckets 1 and 2

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Context:  Based upon the Collins' needs of $50k/year from their portfolio, we will structure it so there is at least four years of spending needs in risk-free assets in Bucket 1 at all times.  This is where the monthly "paycheck" comes from.  Bucket 2 will provide consistent income to help replenish a portion of the distributions, and will give additional protection to help offset stock market volatility.  Lastly, Bucket 3 represents the equities that we hold for the long-term, which enable the portfolio to grow.  The profits from rebalancing, along with the dividends, also replenish Buckets 1 and 2, all while still maintaining the 60% stock level.

Disclosure:  This is a Hypothetical Client example.  Every BTG client portfolio is customized.  Do not consider this financial advice.

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