INVESTMENT MANAGEMENT

Houston Asset Management, Inc., registered as an Investment Advisor with the Texas State Securities Board and Louisiana Commissioner of Securities, makes investment recommendations as one part of the total financial planning services HAM offers its Clients.

Investment recommendations require consideration of objective factors and subjective factors.

OBJECTIVE FACTORS INCLUDE:

• The type and amount of assets and investments,
• Income and estate planning needs,
• Nature and extent of personal and family obligations,
• Client’s ability to assume risk, including both the risk of loss of capital – “market risk” – and the risk of loss or purchasing power – “inflation risk”.

SUBJECTIVE FACTORS INCLUDE:

• Client’s attitude toward various investments,
• Client’s assessment of his or her own ability to manage monies,
• Client’s orientation toward risk, etc.

In developing investment strategies, HAM adheres to these major guidelines:

RECOGNITION OF RISK:

Investment recommendations must be based on understanding of the risk of loss of capital and the risk of loss of purchasing power.  Houston Asset Management believes there is no such thing as risk-free investment.  Understanding the various risks is the key to long term financial success.

A Client in today’s economic environment cannot avoid market risk by placing capital only in fixed income vehicles without increasing exposure to inflation risk.

PROFESSIONAL MANAGEMENT OF PORTFOLIO:

 In most situations, the investor needs qualified experts to oversee investment decisions.

BALANCE AND DIVERSIFICATION OF ASSETS:

Investment planning requires balance – with due consideration to short and long term liquidity needs, combining various investment alternatives with different degrees of risk to develop a balanced, well diversified portfolio.

TIMING:

Timing and equity selection are important factors in construction of investment portfolios.  HAM believes that the most critical aspect of investing is “Time in the Market” – not “Timing the Market”.  Studies have proven that overall investment performance is impacted to a much greater extent by the overall asset allocation strategy employed.

It is for this reason that HAM’s emphasis is the development of a comprehensive asset allocation strategy which takes into consideration the client’s risk/reward profile, investment time horizons, and long term goals and objectives.

ASSET ALLOCATION*:

Modern portfolio theory holds that asset allocation is a key to financial success.  How well a portfolio performs overall depends more on the asset classes selected than the individual securities within the portfolio or the individual portfolio managers.  A diversified investment portfolio consisting of a variety of asset classes will over reasonable periods of time reduce the clients’ exposure to market volatility and increase the risk adjusted return.  

HAM supports the asset allocation theory either through allocation on investments into varying asset classes or through the active employment of a third-party asset manager.

INVESTOR DISCIPLINE:

Investment planning requires a disciplined approach; short term emotional decisions may defeat a well designed investment program.

The investor should commit to the recommended investment approach for a reasonable period of time in order to permit it time to work and to experience the market cycles.

INCOME TAX CONSIDERATIONS:

Income tax considerations should never be a sole determinant for investment decisions.  However important they are, a “real” return is more important.

A proper approach to income tax planning dictates making decisions in advance, rather than attempting to solve tax problems after the fact.

RESEARCH / METHODS OF ANALYSIS:

Various research and analytical methods are utilized to enhance our decision making process.  These include, but are not limited to, using fundamental and technical analysis reviewing and/or researching annual reports, prospectuses and other investment periodicals, research reports and utilizing equity and debt rating services as well as other computer data based firms.

*There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.