Mar 10 2014
March 10, 2014

Successful Investing – Part 1

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At Oak Springs Wealth Management, we believe that there are six key elements leading to successful investing and wealth creation.  These include Asset Allocation, Diversification, Correlation, Loss Avoidance, Rebalancing and Valuation.   When we say investing, we are talking about putting assets to work such that there is growth of and return on those assets over time.  True wealth creation for the typical investor comes from consistent compounding of assets at a reasonable rate over time.  Achieving this leads to the first element of successful investing:   Asset Allocation.  In simple terms this is spreading resources among different asset categories or classes to reap the beneficial returns that are occurring in those classes.  It also means avoiding asset classes that are not performing well.  The three asset classes that we utilize in our asset management strategies are Equities (Stocks), Fixed Income (Bonds or US Government Treasuries), and Real Assets (Commodities or Real Estate).   Equities are attractive when the interest rate environment is accommodative and economies are growing or expanding.  Fixed Income is desirable under deflationary conditions, or, when yields are such that other asset classes simply cannot provide a competitive return opportunity.  Real assets are attractive during periods when inflationary pressures are rising.  A successful investment strategy does not have to include all asset classes at the same time.  In fact, due to the correlation (an element we will discuss in the future) among these asset classes, there may be times when success can be achieved by investing in only one of the classes.  Our disciplined process at Oak Springs allows us identify which asset classes are attractive and also those that are not.  Other elements to be discussed in subsequent postings.

-Willis Mashburn