Core vs. Slice Equities
When investing in portfolios, we tend to divide the type of equities we invest keeping in mind two philosophies; core and slice. I thought it might be helpful to give you some insight into our thinking regarding how we position portfolios and combine assets together to form an appropriate allocation.
At the heart of every investment strategy are "core investment assets" that we utilize as a foundation for equity investments. These positions tend to have the following characteristics:
- Well-established names
- Have strong cash flow
- Predictable earnings
- Often pay dividends
- Market leaders
Focusing on these positions provides equity exposure with a thought towards reducing potential volatility. Investing in these types of names tends to be a less volatile growth path and instead is designed for a more conservative appreciation profile. Assets invested in individual names, ETFs, and mutual funds often are primarily focused on core investment assets.
We also are careful to analyze future trends for the economy and that shapes a percentage of our holdings as well. Future looking technologies including autonomous driving, biotech, online financial services, and other innovative areas of the economy. We do not simply want to look back at the past as we invest portfolios; looking forward has merits as well.
The "slice" positions we invest in tend to have the following characteristics:
- Future innovation
- Recognized pioneers in new innovation technologies
- Demographic tailwinds
- More growth profile, less dividend focus
These assets tend to have more volatility but also provide the long-term opportunity for additional appreciation as trends emerge in the future. We believe it makes sense to focus a percentage of equity assets in the space.
Our default is to weight portfolios more towards core established names with a smaller percent invested in forward looking slice positions. This can provide us the opportunity for future growth but also helps to reduce volatility by investing in core names. Each portfolio is designed for each person's comfort level and long-term goals and the weight distribution between these two philosophies will vary.
Core assets plus a small slice of innovation we believe makes sense as the economy changes and volatility remains high. We believe the combination of the two philosophies gives us the best long opportunity keeping risk in mind.
“Slice assets” are positions utilized in DWM investment strategies that are focused on future technology and future economic growth opportunities. The term “slice” was coined by DWM, representing a smaller percentage or slice of an overall equity portfolio strategy allocation. These assets tend to have more volatility but also provide the long-term opportunity for additional appreciation as trends emerge in the future.
Destination Wealth Management constructs portfolios and investment objectives based on asset allocation principles coupled with tactical adjustments. The firm employs research analysts with significant experience to conduct asset and economic research. DWM allocation philosophy will adjust based on market conditions and economic environment. Allocations are not static and will adjust as needed. These strategies may not be suitable for all investors. For additional information and disclosures, please refer to Adviser’s Form ADV Part 2A.
An “asset allocation” is the decision of how much to invest in each investment category or asset class. While allocations to multiple asset classes can provide diversification and reduce risk, risk cannot be completely eliminated with diversification. There is no guarantee that the listed allocations will eliminate risk, reduce your current exposure to risk or manage your exposure to risk in a way that is tolerable for you. Diversification does not guarantee against experiencing investment losses. There is no guarantee of a specific return or dollar value. Capital loss or gain may result from the purchase of any asset. Investment strategies implemented by DWM are susceptible to market fluctuations and have the potential for investment loss.