BALANCED ACCOUNT MANAGEMENT

Process

A balanced portfolio is most suitable for clients with the overall goal of preserving and enhancing capital.  Before undertaking the management task, a strategic allocation of the client's assets into defined percentages in equity and active fixed income sectors is determined through dialogue with the client.  While the allocation may ultimately be changed (client circumstances, dramatic shifts in relative risk/reward between the asset classes), in general, it provides a long-term framework within which independent management of each asset class is then undertaken.

The Roles of Stocks and Bonds

Each asset class has unique characteristics that serve a specific purpose within a balanced portfolio.  Equities, which tend to comprise the largest portion of a balanced portfolio, serve as the primary source of capital appreciation and inflation protection.  Bonds (taxable or tax-exempt) are the second-largest component and are often the primary source of current income, providing greater certainty of cash flow than any other asset class.  Bond prices also have a low statistical correlation to stock prices, which further diversifies portfolio risk.

Rebalancing Portfolios

Since certain investments will inevitably outperform others, they can grow to represent a disproportionate share of a portfolio.  Therefore, periodic rebalancing of portfolios to keep them within agreed-upon asset allocation is undertaken.

Tax Efficiency

Jamison, Eaton & Wood manages taxable client assets with an awareness of taxes.  Tax considerations do not drive our investment decisions, but Jamison, Eaton & Wood managers take these into consideration relative to the timing of sales.  Particular attention is given to the cumulative impact in any given year.  Incorporating sound tax management into the investment process helps minimize, but does not eliminate, taxes.  Intelligently matching realized gains with losses minimizes taxes.  Gifting highly appreciated securities to fund charitable donations is also a highly effective strategy in lowering tax burdens.