The INVEST/O Philosophy, Thoughts and Investment Strategies:

To serve and educate our investment clients with timely economic advice while promoting a clean portfolio specializing in environmentally and socially responsible investing.

INVEST/O incorporates this mission statement with the personal investment philosophy of each of our clients. Environmentally and socially responsible investing involves high ethical standards on both our parts. INVEST/O believes these core principals provide the base to meet the needs and goals of all our clients.

INVEST/O is a fee based investment advisor. This means we work solely for the client, with no private product to promote. Instead of receiving commissions, our fee is based on the current value of your portfolio.

INVEST/O purposely remains a relatively small business to maintain an advisor/client ratio that ensures individual attention and service. INVEST/O does not make you an account number or use a predetermined investment plan. Your financial goals and investment ideas are necessary to provide you with optimum service.

You have your own criteria in realizing a reasonable rate of return and preserving your capital. To help design individual portfolios and measure market risk, INVEST/O developed "The Risk Factor Method of Investing." This proprietary tool helps to determine when to enter the market, when to get out, and when to buy "insurance" for protection. Using this risk assessment formulation INVEST/O divides your portfolio into core and peripheral portions. Diversification and allocation of individual stocks are based upon your assets, needs, personal preferences and the current market climate.

Many people have the ability and motivation to manage their own portfolios. However, it is time consuming and demanding. You need access to timely, accurate information, and a broker you can trust. With the increasing volatility and potential for dramatic declines in today’s market, managing your own money can be like a full-time job. INVEST/O does offer consulting services and professional support for anyone wanting to manage their own portfolios. Our services can help you define your financial goals, establish an IRA, evaluate your insurance needs, periodically review your portfolio, assist with trusts and tax issues, and charitable stock contributions and other types of gifts and transfers.

Thoughts on Investment Strategies:

Several factors need consideration in creating an investment strategy for a client, these include:

Time Frames and Types of Investments          Market Timing vs. Buy & Hold

Measure of Market Risk - Measure of Individual Stock Risk

A Portfolio To Be Proud Of - Portfolio Structure

General Thoughts on Choosing an Investment Advisor


Evaluating future needs and time-oriented goals for invested funds, whether for retirement, a dream home, or a child’s education, are a major part of a solid investment plan. When and how often will you need access to your money? If you need access to a large percentage of your invested funds in less than five years for example, you need to be a more conservative investor. As the need for a large portion of your assets approaches, you may want to ease out of stocks to reduce risk. INVEST/O can help you develop strategies to meet your specific time frames.


Investors often determine their asset allocation based on past results. Many tend to simply cut exposure to stocks when the market falls. The fallacy with this approach is that it allows past, random results to dictate what should be a long-term decision. If the need to reduce risk is not imminent, opting for short-term safety may cost you the chance to earn greater returns in the long run. There are many ways to diversify your holdings while keeping long-term strategy intact.

Between 1926 and 1999, stocks have returned more than bonds or cash. While recent times have certainly seen difficult twists and turns in the market, it is important to consider the historical perspective. According to a University of Chicago study by Roger Ibbotson and Rex Sinquefield, stocks beat both cash and bonds in 61% of the 58 one-year periods between 1926 and 1983. Stocks were the best performer in 71% of all five-year periods, 73% of all ten-year periods, and 100% of all 25-year periods. For the entire period, stocks returned 9.5% annually, compared with about 4% for bonds and 3.2% for cash.

Most people end up taking too little risk. One problem with being in stocks is that many people can’t stomach the occasional steep drops. People are risk-averse until they lose money, and all too often throw in the towel near the bottom and get out, abandoning their long-term plan out of fear that the market will continue to fall.


If owning common stocks is more advantageous than most other types of investments over long periods of time, then the disadvantages are the possibility of being shaken out of the market during a long downward trend, or needing money in the near future. To alleviate these situations we use market timing to allow us to avoid major down markets and to allow more fully invested positions longer, prior to actual withdrawal of funds to meet outside cash needs. To show a comparison of how even a moderately successful market timing effort can pay off for investors we will quote Market Logic editor Norman G. Fosback:

"During the period 30 April 1964, through 31 December 1984, the Total Return Index rose from 101.77 to 890.40, a total return of 775%. In other words, $10,000 invested at the beginning of the period in a representative portfolio of NYSE stocks would have grown to $87,500, including reinvested dividends by the end of 1984. That is an annual compounded rate of return of 11%. The Consumer Price Index increased 6% per annum, so common stocks were obviously a good hedge against inflation.

Now, let’s assume an investor owned stocks only during the four major bull markets of the period, and held cash during the three bear markets. Through this superior market timing, the annual rate of return would have nearly doubled from 11% to 21%. The performance would have been achieved without ever picking a single stock or speculating on margin, but by merely buying and selling ‘the Market’.

Even more dramatically, if the investor had sold the market short during the three bear markets - instead of just holding cash - he would have realized additional profits, and increased his annual rate of return to 27%. At that rate, a $10,000 initial investment would have grown to nearly $1.4 million.

Of course, few are the omniscients who can identify every cycle top and bottom to perfection. But, even readily attainable levels of market-timing success can dramatically impact overall returns. For example, an investor who owned stocks during three-fourths of the bear market periods, and who shorted the market in just one quarter of each of those periods, could have spared himself half the losses incurred by his fully-invested counterparts, and his $10,000 would have grown to $237,790. That equals a 17% per annum rate . . . much better than buy and hold."

Incorporating elements of both buy-and-hold and market timing strategies is possible. These are just two of the strategies or considerations we take in customizing each individual portfolio. Often it is advantageous to take some profits on a long-term holding that has appreciated, other times it is necessary to liquidate a position that might lead the market downward in a negative trend. Again, these factors and strategies are considered and used on a case-by-case basis.


INVEST/O - Registered Investment Advisors’ publication, The Risk Factor Method of Investing takes the unique approach of measuring the amount of risk present in the marketplace and then evaluating each security held to determine the amount of risk holding that security has on the entire portfolio of stocks.

To measure market risk we look at fundamental, monetary, sentiment and technical factors. Each factor used to measure market risk is weighted according to its degree of accuracy. Some of the fundamental factors we look at are the general price/earning multiples, yields and book values. The monetary factors include yield curve, fed funds to discount rate spread, and interest rate trends. For sentiment we look to see what the margin debt levels are and how much cash mutual funds have. And our technical trends measure the advance-decline line, and the number of new highs and new lows being recorded in the market.

Once the risk of the market has been determined, we then measure the amount of risk in the individual securities by comparing their fundamental and technical factors to other stocks in general, other stocks in the same industry, and also that stock’s own history.


The philosophy used in making recommendations, and in managing accounts is twofold. First, to posture the account to be consistent with the current market factors. To maintain a conservative/defensive posture while in weak and declining markets, and to be aggressive during rising markets. And second, to avoid investments that do damage to living beings and the environment. We encourage investing in companies that do not contribute to the destruction of life or the environment. Thus, we encourage investing in companies that do not deal with tobacco products, oil, nuclear technology, firms that do animal testing, and companies with poor environmental and social records. As you’ll see below in the breakdown of our core portfolio, we proudly promote investing in water, alternative energy, ecology and environmental stocks.

In building a portfolio we have a portion that remains rather constant, the Core, and a second portion for trading, the Peripheral.

The Core Portfolio usually consists of about 50% of the Total Liquidation Value (TLV) of the account, and follows long term commitments to basic philosophies. In general when very high risk is indicated for the market this is the last portion of the portfolio to be liquidated. Equity securities suitable for a wide variety of investors are used with average volatility to be generally equal to the broad market averages. Whenever possible optionable securities are used to enable us to protect from declining markets without selling the underlying security.

The Core Portfolio is divided into the following philosophies, 50+%

Yield Appreciation stocks: usual minimum: 20%

Qualifying stocks must have long, uninterrupted histories of well protected dividends which have been increasing faster than the rate of inflation. We search for growing yields rather than currently high yields. Some common stocks have the potential to provide an increasing yield on the original investment through the growth of dividends. This takes place as company growth is reflected in earnings growth, which allows for dividend growth. As dividends expand and current yields remain constant, some capital appreciation must take place. Our intent is to develop long term capital gains and yield appreciation on the original investment.

Hedge Stocks: Usual range: 6% to 15%

Because we do not know the future of inflation and we have no control over the government’s use of the printing press, gold, silver or other precious metals should be included in the portfolio as an insurance policy, or hedge.

Water Stocks: Usual minimum: 10%

Water is quite possibly the most basic, fundamental and crucial resource to all life. And it is the scarce resource of the decades ahead Regional tension between those states that have water and those that do not, and ecological considerations including whether the water we drink and use is pure, will cause an impending water crisis. We need a small package of stocks that are doing something about water related problems. We watch and invest in a variety of companies that are involved in the purification, filtration, transportation and utilization of water.

Alternative Energy Stocks: Usual minimum: 5%

New and renewable sources of energy such as photovoltaics (solar), wind, fuel cell, and geothermal technologies are among our choices here. Many of these are positive, environmentally sensitive growth areas for the future. We avoid nuclear power due to potential accidents and the resulting toxic, radioactive waste produced, and its storage. Nuclear power is not a responsible or a reasonable solution to human energy demand. The potential of renewable fuels and fuel cells combined with conservation and efficiency will be comparable to industrial revolutions of the past and will hopefully lead us in a more sustainable direction in terms of energy and electricity use.

Environment and Ecology Stocks: Usual minimum: 5%

Many of our natural resources are becoming scarce. Earth’s biodiversity and the ecosystems that it sustains are threatened. Companies and technologies which seek to protect the environment, or give back to it, are investment candidates. Toxic waste management, garbage, recycling, and pollution control are examples of products or services with increasing value.

Peripheral Portfolio: Expected range from 50% to 150% of the total account value

This portion of the portfolio is the most flexible part which will expand and contract as we pass through market cycles. When market risk is high this part of the portfolio may be entirely in cash equivalents and put options. As market risk falls this portion will become increasingly aggressive and become fully invested. If authority is granted, margin and call options are a possibility. Securities in this portion will usually conform to one of the following concepts.

High Relative Strength: Stocks are purchased here that are acting better than the general market, focusing on the current performance of the stock, not the company. This is strictly a technical approach used in rising markets by buying the stocks that are going up the most. In trading markets, stocks are held that are going up independent of the flat trend. In declining markets we avoid purchases. By using mental stop-losses, stocks are sometimes sold that would eventually become winners, but consistently applied over a long period of time, a system of stop-loss protection is vital to protecting capital.

Asset Play: A company whose assets are not reflected in the price of the stock. Examples: real estate holdings, patents, copyrights, natural resource lease holdings, in-ground reserves of oil, gas, precious metals, etc. Most takeover candidates are in this category. Moderate risk - high reward.

Turnaround Situation: A company that may report significant per share earnings versus a prior year’s loss, or poor earnings performance. Moderately speculative. Usually the current stock price is low, reflecting the company’s poor performance.

High-Tech Situation: A company that shows prospects of earnings growth due to its technological expertise in its respective field. Very risky - high reward.

Income Situation: Utilities, preferred stocks and bonds. For IRAs they represent compounding of tax-free dividends and interest. These securities for one reason or another just do not conform to our Yield Securities listed above under our Core portfolio, yet they may have other good characteristics.

Special Growth Situation: A company that has a consistent record of sales and per share earnings growth.

Tax Situation: Securities which do not conform to any other category and should not be held except that, for tax reasons, it is not currently wise to sell the security.

Other Special Situations: A company whose assets and stock price may increase significantly as a result of a favorable litigation settlement, takeover, extraordinary profit, large contract or a technological breakthrough. Usually speculative but near-term explosive price appreciation is possible.


Methods used by one investment advisor can be diametrically the opposite of another advisor, yet both can make money. For example, the basic Relative Strength concept is to buy high and hopefully sell higher. There is no doubt that Relative Strength does work, and occasionally in a most spectacular manner.

Another approach might be to purchase only stocks with low Price Earnings multiples and greater total returns. Buying low PE stocks and selling high PE stocks has been proven to be a simple way to beat the market.

Relative Strength is almost the antithesis of the low PE approach. The low PE approach shuns the high Relative Strength stocks, yet both methods work and are successful for some advisors.

The common characteristic winning advisors have is the ability to stick to their original game plans. They know in advance that there will be periods when the market will frustrate them. In fact, there will be periods when the market is going to make them look downright foolish. The point is, during these adverse periods they do not abandon the winning concepts.

Losing advisors and losing investors are constantly looking for Wall Street’s Holy Grail. Unfortunately, it does not exist. They are constantly jumping from one theory to another. With no overall plan of attack, and without a plan that you are going to adhere to, you will not do well in the stock market. You have to find an approach that is compatible to your personality, refine it, and then put this approach into actual practice, and adhere to it.

There are many extremely intelligent people who continually lose money in the stock market. The reason they lose is because they lack an overall game plan. Intelligence has nothing to do with it, the market really doesn’t care if you have an MBA. There are times when intelligence can work against you, because the market often takes twists and turns that fly in the face of intelligence and logic. For example, it might seem logical to salt away a few profits after the market has had a big upward move. The tendency is to sell stocks that have advanced the most and retain those that have not yet participated in the rise. It does not take much reasoning to conclude that those which have appreciated the most are probably perilously high, while those which stood relatively still are less likely to drop. While this approach is logical, it is very often wrong. The stocks that ballooned most in price probably did so on their own merit. Except for normal corrections from time to time, they are quite likely to keep on rising. But the stocks that stood still probably did so because they were already fully valued.

INVEST/O is a small but effective investment advisory service, and therefore gives each client unique and personalized attention. Each client’s financial goals and investment ideas and values are key ingredients in our work. We strive to maintain a clean, proven investment philosophy tailored to an individual’s needs and goals.

An investment advisor has the resources and knowledge to choose rewarding investments. Pick an advisor with a philosophy you can be proud of and who has the willingness to stick to his or her principles.