Investment Approach and Philosophy

Pragmatic Portfolios, LLC provides fee-only investment planning, advisory, and wealth management services. Founded by Steven R. Thorpe, the firm typically recommends portfolios with cost-efficient passively managed asset allocation strategies that are coordinated across all of a client’s investment accounts. Please contact us today for a complimentary consultation to discuss how we might assist you in reaching your long term financial goals.

Our collaborative process between client and adviser includes the following steps:
  1. Understand
    We work closely with each client to understand their values, goals, objectives, financial situation, investment attitudes, time horizon, and risk tolerance.
  2. Analyze
    The gathered information is analyzed and evaluated by the adviser in developing unbiased, conflict-free recommendations.
  3. Recommend
    Investment policy recommendations are presented for consideration, clients are advised on the implications of selecting particular alternatives, and a plan with detailed client-selected action steps is finalized.
  4. Implement
    If Pragmatic Portfolios, LLC is retained for portfolio management services, we work with clients to complete any necessary paperwork then implement their detailed action steps. For clients preferring to manage their own portfolios, we follow up to encourage them to implement the plan.
  5. Monitor
    An investment portfolio must be periodically monitored, according to the plan's investment policy, for potential adjustments that might be needed due to market fluctuations and cash flows. This is done by the client and/or adviser, depending on the service arrangement.
  6. Revise
    Whenever client circumstances change, the above process should be revisited in order to make appropriate changes to the investment policy and portfolio.

During the process of developing investment plans, a limited amount of advice may be given in other personal finance areas such as budgeting, etc. However for legal, tax, and insurance needs, clients are encouraged to contact licensed professionals in those specific areas.

Recommended portfolios often include a "tilt" towards holding somewhat higher percentages of small and value-oriented stocks, as compared to their percentages within the overall stock market. This is based on research indicating small and value-oriented equities tend to outperform large and growth categories over long periods time, albeit with commensurately higher risks. International equity and Real Estate Investment Trust equity classes are often recommended as well, due to the diversification benefits they tend to provide over the long-term.

To help offset the higher risks associated with stocks, healthy allocations to fixed-income (bond) categories are generally recommended. On the fixed-income side, both nominal and inflation-protected US treasuries are usually recommended, along with some exposure to high-quality corporate bonds. Municipal bond classes may be suggested to investors with significant taxable portfolios, due to their favorable taxation characteristics. We generally suggest holding only short and intermediate term fixed-income durations, in order to avoid the extra volatility inherent in longer-term bonds due to greater effects from changes in interest rates.

We carefully consult with each client to develop recommendations according to their unique situation. Finalizing a plan is an iterative process that often takes several weeks or longer.

In order to maintain our unbiased conflict-free approach, our revenue is entirely based on the fixed fees paid directly by our clients. No commissions or soft-dollar kickbacks are ever accepted by the firm. Furthermore, no client assets are held in custody by Pragmatic Portfolios, LLC, instead they're always held with third-party custodians.

Pragmatic Portfolios, LLC emphasizes low-cost passively managed mutual funds and exchange-traded funds across a variety of asset classes. These widely diversified funds achieve virtually all of the returns afforded by their underlying asset classes, while reducing some of the risks associated with more concentrated, actively managed strategies. Our recommendations often reduce investor costs (expense ratios, taxes, transaction fees, commissions, etc.). Accordingly, a commensurate improvement in after-tax returns is likely over the long term.

We stress the importance of regular saving, broad diversification, and maintaining an investment policy designed for varying market conditions. The individualized planning process includes deciding on an appropriate target asset allocation: percentages to various asset classes, such as domestic and international stocks, bonds, small cap, large cap, value, blend, etc. Allocations are implemented using low-cost vehicles true to their targeted asset classes. Potential tax costs are carefully considered, influencing which asset classes are placed in taxable versus tax-advantaged accounts. Available fund selections among a client’s various investment accounts (e.g. 401k, 403b, IRA, taxable, etc.) are closely analyzed when developing coordinated plans for each client’s unique situation.

Our approach is a welcome relief from the Wall Street Marketing Machine, with its many ads that imply great benefits from active stock-picking strategies and tout historical out-performance of their investment options that happen to have done well recently. What they fail to mention is over the long-term, though active-management investment strategies do benefit the investment managers, almost invariably they are a losing game for investors. Costs to investors are guaranteed to be higher with active management, yet performance of these strategies are likely to be lower as compared to low-cost, passively managed strategies. The plot usually sickens when active management's tax effects are taken into account. The ads usually have disclaimers in micro-sized font noting past performance is not a guarantee of future results. Though this is a tremendously important truth included due to regulatory requirements, the overall ad messages often imply otherwise.

Our passively managed asset allocation investment style is heavily influenced by well-established research results. Please see our Frequently Asked Questions for a relevant author list.