FREQUENTLY ASKED QUESTIONS

What is your approach to investing?

Like Warren Buffett, we believe that no one can accurately time the markets. The next short-term uptick or downtick of the Dow is unknowable; only a charlatan would pretend otherwise. We apply the only approach that we believe works over time: a long-term investment strategy rooted in the precepts of value investing. Value investing, used by scores of the most successful investors over the years—from Buffett to Charlie Munger to Charles Brandes and to Peter Lynch—looks at securities for what they are: the ownership stakes in businesses (or the debt obligations of companies or governments, as in the case of bonds). We try to buy such securities at discounts to their intrinsic value—as measured by the financial statements—when the market panics by selling off a particular sector or company. We try to sell securities at times of exuberance and overextended optimism, when prices are artificially high and reinvest those proceeds in what’s underpriced.

 

What don’t you do?

We don’t buy or sell based on charts of stock movements, trading strategies or “hunches” because we believe those are recipes for eventual failure, no matter the practitioner. We buy what is undervalued and sell what’s overvalued, reallocating from the expensive to the cheap. We do this fully agnostic to when the tide will turn, but cognizant that it usually will. Good assets return to favor eventually. We eschew market timing, trading and most hedging strategies, deeming them false comforts, often destined to fail—ironically, just when they’re needed most. As the saying goes, the market is designed to humiliate the maximum people the maximum number of times. We approach markets with the appropriate humility, which means foregoing “macro” calls, the next new thing, and all manner of hype and trend. We typically buy securities or funds in sectors that are unloved, unwanted and unfashionable—and hence cheap as a result. Those looking for a trader, market timer or “seer” should look elsewhere. Those looking for professional investors who base their decision on a calm and deliberative assessment of value should work with us.

 

What is Charles Schwab and what is their relationship to your firm?

Charles Schwab & Co. is one of the largest and most highly regarded brokerage firms in the world. Schwab Institutional, a division of Charles Schwab & Co., acts as an independent custodian for our client accounts and executes trades on behalf of our clients. They also provide the bulk of our back-office support, including creating and mailing account statements and keeping track of tax information. A service team at Schwab Institutional is dedicated to our accounts and provides world-class service and technical support. We are a completely independent and separate business from Schwab Institutional.

 

What types of regular documents will I receive from Schwab Institutional?

You’ll receive confirmations as trades are placed in your account. You’ll also receive monthly statements that reflect your total balance, including all activity in your account. If you have any difficulty understanding your statement, please call us for assistance. These documents should be stored in a safe location indefinitely.

 

What types of tax documents will I receive from Schwab Institutional?

For each taxable account, you’ll receive a Consolidated 1099 and a Year-End Summary Statement by the end of February (you will not receive any tax documentation for tax-deferred and tax-free accounts, such as pension plans, 403(b)’s, 401(k)’s, IRA’s and Roth IRA’s). All tax documents must be forwarded to your accountant for tax return preparation. Please note that you will often receive corrected 1099’s (that reclassify certain income items) as late as mid-March. Therefore, we recommend that you hold off on actually filing your return until the end of March so that corrections can be made, if necessary, without having to file an amended return.

 

How will my accountant obtain realized capital gains information?

Schwab will send you a realized capital gain report for each taxable account by the end of February. Please provide this to your accountant along with you other tax forms. Your account will use it to prepare your taxes. Tax-free or tax-deferred accounts will not receive a capital gains report.

 

What other types of documents will I receive from Schwab Institutional?

A prospectus for each ETF or other similar security will be mailed to you upon purchase, as required by law. You will also receive semi-annual, annual reports, and proxy statements for each fund. These documents do not need to be retained or acted upon.

 

What types of documents will I receive directly from you?

You’ll receive our quarterly email letter commenting on investment topics. If you wish to be removed from this email list, please simply email back the word “unsubscribe.”

 

How do I switch to electronic document delivery and get rid of all that paper?

You can switch your account statements and confirmations to electronic delivery.  You can do the same with your fund mailings (including prospectus, proxy and report mailings). Direct internet access to your account can also be provided. To do any of the above, please call Schwab Institutional directly at (877) 774-3891 and choose option #4. The tech support team will be happy to help you. Be sure to specify exactly which documents you wish to receive electronically and if you wish direct internet access to your account. Be sure to have your account numbers on hand when you call.

 

How do I find out my account balances?

You will receive monthly statements from Schwab showing your account value. If you would like to know your account value on a more frequent basis, we recommend you sign up for internet access (see above) which allows you to see your account value 24 hours a day, seven days a week. You can also always get your account value by calling Schwab directly at (800) 515-2157. Please have your account number (or social security number) ready when you call.

 

What type of contact can I expect from you?

We call or email each client at least annually (usually in February) in order to review the prior year’s performance and plan the coming year’s allocation. Beyond that, we leave it up to each client to call or email more frequently, as preference dictates. Some clients call quarterly to receive more regular updates. Others find the annual review satisfactory. We are always happy to schedule in-person meetings for comprehensive reviews. The important thing is to always call if you have any questions or concern, no matter how small it may seem. We welcome all contact, and we purposely limit our business to large accounts so that we can devote adequate time and attention to our existing clients.

 

How do I make further contributions to my account?

To make contributions to your account, make out a check to Schwab Institutional in the amount of the deposit and send it directly to: Charles Schwab & Co. Inc., P.O. Box 628290, Orlando, FL 32862-9905. (Note: this address cannot receive express or overnight mail. Please send all express and overnight mail to: Charles Schwab & Co. Inc., 1945 Northwestern Drive, El Paso, TX 79912, Tel 877-774-3891). When you send your deposit, be sure to write your account number clearly on the memo line of the check. Once your check is deposited, we will invest it along the lines of your current target asset allocation. If you have specific instructions otherwise, please be sure to inform us before you send your check. If you plan to make regular contributions, please contact us to set up MoneyLink, a Schwab feature which allows for no-fee, electronic transfers directly from your bank checking account to your Schwab account.

 

How do I make withdrawals from my account?

To make withdrawals, you can call Schwab directly or contact us. We will analyze the account to determine the best asset to liquidate—from both a tax and investment perspective. We will then execute the sell order and monitor the settlement of funds. Finally, we will inform Schwab to issue you a check. Note that retirement account distributions require special forms to be signed. Please be sure to allow at least two weeks lead time for withdrawals to ensure enough leeway for analysis, liquidation, settlement and mailing. Schwab Institutional will send checks via express mail upon request (for a $10 fee, charged directly to your account). Please note that, for security reasons, checks can only be sent payable to the account holder and only to the account’s address of record. Finally, please note that withdrawals can be disruptive to your investment strategy. They can also result in adverse tax consequences and trading fees. For these reasons, it’s best to keep withdrawals to a minimum. It’s far better to reserve 3-6 months’ cash in your bank savings account for emergencies and unforeseen expenses than to invest it—only to withdraw it a short time later. If you plan to make regular withdrawals, please contact us to set up MoneyLink, a Schwab feature which allows for no-fee, electronic transfers directly from your Schwab account to your bank checking account.