Describe the passive investment approach.

Every BAM network firm adopts a passive investment approach, tailoring your portfolio’s level of risk (and its expected returns) according to your personal preferences, goals and circumstances. This includes adherence to the tenets of Modern Portfolio Theory (MPT) and to the guidelines provided by the American Law Institute in drafting The Uniform Prudent Investor Rule.

The critical lessons of Modern Portfolio Theory demonstrate that markets are basically efficient over time and that asset allocation -- how your assets are exposed to various risk factors -- is the major determinant to portfolio performance. BAM network firms build portfolios accordingly, typically using low-cost, passively managed mutual funds and diversifying globally to reduce non-market risks. 

In contrast, most financial service firms base their investment strategies on “active management.” Active management assumes that the markets are generally inefficient, allowing “clever” individuals to regularly exploit and profit from the anomalies (beyond the costs of consistently seeking and executing such trades). And yet, there is overwhelming academic evidence that the collective wisdom of all market players results in highly efficient markets. Markets reflect fair pricing almost instantaneously upon release of any good or bad price-related news.

In offering a passive management approach, BAM network firms heed the academic wisdom, assuming that opportunities to exploit inefficiencies are too rare to pursue effectively and affordably.

If you would like to talk to a BAM Network Advisor about customized wealth management strategies that can help you reach your financial goals,please call us at (866) 417-2211 or submit our inquiry form by clicking here: Find a BAM Advisor.