Whether an Equity, Balanced, or Fixed Income Strategy is deemed appropriate for a particular client, the DVI investment philosophy remains consistent. Investment decisions have a long term focus, with an emphasis on value and tax efficiency.
We construct our equity portfolios by focusing on companies with attractive valuations, consistent and increasing dividends, and strong balance sheets. Equity portfolios are diversified across economic sectors and typically hold 70-90 stocks. Positions are added to portfolios with a long term focus, limiting turnover and increasing tax efficiency.
Given the emphasis on dividend paying companies, the dividend yield of the portfolio exceeds that of the S&P 500. Dividends have historically been a large component of equity market total returns and companies paying dividends typically perform better than the overall market during declining markets.
Our Balanced Strategy meets the specific needs of clients who require a blend of our Equity Strategy and our Fixed Income Strategy. Each client's asset allocation is customized based on their individual risk tolerance, income needs and investment time horizon. We work with clients to determine the appropriate mixture of stocks and bonds for their portfolios, and we monitor and adjust this balance as their needs change.
We also use an asset-liability matching process to further refine a client's asset allocation. This process sets aside certain assets in fixed income investments to prefund any known short-to-intermediate term cash flow liabilities such as taxes, college tuition expenses or large asset purchases. We believe this greatly reduces the impact of short term market volatility on the client's wealth and allows the equity portion of their portfolio to remain invested for long term growth.
To complement our Equity Strategy, we take a conservative buy-and-hold approach to fixed income portfolio management: purchasing high quality, investment-grade securities with intermediate–term maturity structures. The strategy can employ taxable and/or tax exempt securities depending upon the client's specific needs.
Historically, fixed income portfolios with intermediate term maturities have provided the best risk-adjusted rates of return. As a result, we typically target a maturity profile of two to seven years in our fixed income portfolios.