Investment Process

At Midland our wealth management framework provides the starting point for your customized investment solution. We believe sound investment decisions are made for your specific, time-bound and consumption oriented goals aided by Monte Carlo simulations. Advising on your investment assets is not an ivory tower exercise. The answer does not come through a black-box or magical software. It lies in balancing the use of quantitative tools and qualitative judgment.

Here’s how we go about it:

Step One: Determine the right mix of stocks, bonds and alternative investments. We look at your personality, lifestyle issues, goals, risk profile an general concerns to determine the appropriate asset allocation mix. We utilize asset allocation modeling to see if the risk/reward is reasonable per your goals and objectives. Midland does NOT take the model output at face value. Adjustments are made based upon your personal, tax and estate goals and circumstances. Bottom line: we look to match your assets with being able to fund your liabilities in good times and bad.

Step Two: Write an Investment Policy Statement. Our experience has shown that successful long-term investing depends on remaining unemotional in both stormy and calm investment environments. Writing down how you will invest, the amount of investment uncertainty you will permit, monitoring your progress and grading your performance from a risk/reward perspective can make the difference between success or failure.

Step Three: Allocating of Investments. Midland uses a tax- and expense conscious “core and satellite” strategy for investment portfolios.

The core allocation to stocks is based on two of academia’s leading researchers, Eugene Fama and Kenneth French, and their analysis for the sources of investment risk and return. There are three factors that drive stock investment performance:

Market    Stocks have a higher expected return than bonds
Size        Small company stocks have a higher expected return than large company stocks
Price       Lowered-priced “value” stocks have a higher expected return than higher-priced              “growth” stocks

Based on the three factor model - market, size and price - the majority of a client’s stock portfolio is allocated to a core strategy with a structured passive value manager who is very cost and tax efficient. This manager looks to capture the returns for large and small value stocks over the long-term based on the assumption that markets are efficient pricing mechanisms. The rest, the "satellite" portfolio, manages legacy active money managers who either by tax situation or by client instruction remain the investment portfolio with the long-term goal of diversifying away for them.

The bond allocation is designed to either produce income or to provide stability. A traditional bond ladder approach is used purchasing investment grade non-callable bonds in equal amounts with maturities ranging from one to ten years.

Step Four: Monitor your situation and investments. This is the hard part. Your situation and expectations change, stock and bond markets change and government tax and estate rules change. Each change will not necessarily be in the direction you want. Or even at the same time. Midland recognizes that financial freedom requires more than smart decisions making, a sound strategy and careful execution – it requires constant monitoring.

We communicate with your estate and tax advisors allowing them to be proactive not reactive to your needs. We review the asset allocation, question the “why’s” and the “how’s” to your total wealth management situation. The bottom line: We are always asking and never assuming.