At Ifrah Financial Services, we take a risk managed approach to handling your investment portfolio. We develop strategies designed to help meet your needs and financial goals.
Ifrah Financial manages money using a data driven approach. A combination of desirable business metrics, along with appropriate valuation criteria, is used to find stocks that we believe will provide superior risk/return potential. By using multiple strategies within a portfolio, we attempt to balance the overall risk/return profile of the portfolio for different time frames ranging from the shorter to longer term. With focus on the long term, the combined components within a portfolio are designed to create a well-diversified portfolio.
We view the investment process as a balancing act. Screening for and finding quality companies is relatively easy. One of the keys to good risk adjusted performance involves more than just investing in great companies. Critical to the process is the price one pays for a given stock. Doing so while avoiding stocks with cheap valuations that turn into value traps is important. Value traps are stocks that are relatively cheap but do not increase in value for extended periods of time. This can occur for many reasons, some which are not necessarily obvious to everyone. We therefore not only give consideration valuation but consider momentum as well to reduce the risks of such exposure or poor timing.
A great company doesn’t necessarily make for a great stock. A great stock in our view is one that generates a superior return. As an example, when the stock market is doing well, it is very tempting for most investors to chase the stocks that everyone else wants to own, those that seem to go up relentlessly regardless of their underlying worth. Using an overall portfolio approach helps ensure that we remain diversified and consider other positions within a portfolio. There are times when professional judgement about the market environment will play a role as well in giving some flexibility and latitude when warranted.
The use of Passive and Active strategies reconciles two schools of thought on investing. The pundits of indexing have favored the most passive approaches to mimic index returns and limit expenses to achieve their investment objectives. In a lot of cases, a passive approach following traditional market capitalization weighted indexes can create concentration in few large companies. We believe in using both active and passive approaches when feasible allowing for diversification of approaches. We feel that a passive component in one’s portfolio makes sense to establish low-cost diversification and serve as a core element. We then actively manage the remainder of the assets in the portfolio to attempt to enhance returns and reduce risks compared to using a purely passive strategy.
We also invest using multiple points of view by applying multiple disciplines of investing to not just diversify types of securities used, but diversify the methodologies and approaches used. For example, consideration to both value and growth-based investing as part of the investment mix can help provide a better balance to a given portfolio over the long term.
We do not focus on just one view of how to succeed in the markets. We recognize that sometimes certain approaches work better than others so we are open to using multiple approaches in a way that a traditional manager may not consider.
We review the overall portfolio to avoid undesirable concentrations in too few securities, industries or sectors. Picking great stocks is only one part of the process of proper portfolio construction. Another important step is to assemble a group of stocks in such a way as to achieve a desired result from a risk/return standpoint. There are differing degrees of correlation among the various stocks within a portfolio and assembling these in a way that can reduce overall portfolio volatility is desirable.
A portfolio that might appear diversified on the surface, because it contains many securities, could be focused on stocks that tend to move together. With higher correlations among the securities within a portfolio, one would be assuming a higher level of risk than necessary. Simple diversification by owning a number of stocks is not enough. The dynamics of the portfolio have to be evaluated on an ongoing basis.
Positions in the portfolio are continuously reviewed to ensure they are serving their purpose and to see how they compare to other companies that have recently passed the screening process. Despite a bias towards holding positions for the long term, a position might be sold simply to make room for a more attractive opportunity. Sometimes a stock may be held after a negative event because the valuation has dropped enough to warrant remaining patient.
Although sound investment management overrides tax considerations, we attempt to take advantage of opportunities to match gains and losses within the same tax year to provide the portfolio with some level of tax efficiency when applicable.
