Our Investment Management Philosophy

Our Investment Management Philosophy

McGee Wealth Management's investment philosophy is based on the belief that proactive risk management and disciplined portfolio construction will result in more consistent returns over the long-term.


Investment Principle: Markets are macro-inefficient

The markets are macro-inefficient.

Investment Principle: Portfolio Management

Successful portfolio management is best achieved by adapting to changing market conditions over time.

Investment Principle: Risk

Risk should be managed through asset allocation and informed decision making.

The Foundation of Our Investment Philosophy

Our investment philosophy's foundation is built on the idea that each financial situation is unique and deserves a personalized approach to investment management, whether you are an individual or an institution. Our primary objective is to help you define and achieve your financial goals within parameters appropriate to your situation.

The starting point for setting the right mix of assets classes for your portfolio is to understand your cash flow requirements, return expectations, and risk tolerance. We then integrate this information with our macroeconomic views, market return expectations, and our list of managers, funds, and individual securities to create investment portfolios. Once portfolios are constructed, we monitor, manage, and review your portfolio in response to developments in the capital markets, geopolitical changes, and economic events. Our objective is to provide optimal risk-adjusted portfolios that provide above-average returns with lower volatility over the long term.

McGee Wealth Management’s core beliefs that guide our investment philosophy begin with Modern Portfolio Theory (MPT) and are a primary driver of our portfolio construction.

Portfolio risk can be decreased by increasing the portfolio diversification among the different asset classes, including cash, bonds, domestic and foreign stocks, and tangible assets (REITS, commodities, and natural resource investments).

Investment decision-making is a trade-off between risk and return.

Timing the purchase or sale of investments in the attempt to “beat the market” is highly unlikely to increase long-term investment returns. Such practices, therefore, are to be avoided.

We believe both passive and active management in equities serve a purpose dependent upon the current market environment. We prefer active management in fixed income due to the complexity of credit analysis, inventory constraints, and marketability of individual bonds.

Our Investment Process

  1. Investment Policy
  2. Risk Management
  3. Economic & Capital Markets Review (Macro)
  4. Asset Research and Review (Fundamental)
  5. Reallocate
  6. Active Monitoring
  7. Adjust for New Information
The Investment Process Outline at McGee Wealth Management

1. Investment Policy

Your investment policy is a written document that serves as the guide to how your investments will be managed. It begins with a risk assessment between clients and MWM advisor and takes your cash flow needs, tax considerations, goals and objectives, investment experience, investment bias’, risk tolerance, and time horizon into consideration. This document outlines the parameters for your asset allocation and how your funds will be managed on a discretionary1 basis.

2. Risk Management

The MWM Investment Committee builds your portfolio based on your investment policy statement utilizing Modern Portfolio Theory2. In addition, we look at risk budgeting3 for each asset class and its associated investments. The goal is to ensure that you are getting the expected return for the risk being taken. Overall, we aim to maximize the upside capture of the market(s) and minimize the downside capture relative to your portfolio's risk tolerance, to get more consistent returns over time.

3. Economic & Capital Markets Review (Macro)

The MWM Investment committee periodically reviews the macroeconomic and the geopolitical environment for changes in direction that could affect the way asset classes, market sectors, or individual securities may be affected by these changes. These factors may include but are not limited to, tax policy, business cycle(s), interest rates, gross domestic product (GDP), employment, government policy, civil unrest, etc.

4. Asset Research and Review (Fundamental and Technical)

The MWM Investment Committee performs research of individual investments utilizing both fundamental and technical analysis. Fundamental analysis evaluates financial statements to assess the general health of an investment while technical analysis looks at price charts and price behavior to form an opinion of the potential direction of an asset price. In addition to our own research, MWM also utilizes the research of third-party industry leaders.

5. Reallocate

MWM reallocates portfolios periodically based on cash flows, asset allocation, investment selection changes, and/or annually. Reallocation in taxable accounts considers tax consequences. We aim to mitigate taxes whenever possible.

6. Active Monitoring

MWM Investment Committee monitors and rescreens account holdings and benchmarks them against their peer group and relative indices. We review each portfolio's major asset class allocation and sector weightings periodically no less than quarterly. MWM meets with you to review your investment portfolios for cash flows, asset allocation, performance, risk (volatility), tax consequences, and costs no less than annually, determined by your desired review schedule.

7. Adjust for New Information

MWM makes adjustments to portfolios based on new information from macroeconomic and capital markets conditions, fundamental and technical analysis factors, change in cash flow needs, risk tolerance, or life events that may affect investment selection and/or asset allocation strategy.

McGee Wealth Management aims to provide a risk-adjusted return through a process-driven, diversified portfolio with a target asset allocation strategy. Our process provides you with a diversified portfolio that is constructed to help you stay on track to meet your long-term goals and help prepare for surprises that can negatively impact your portfolio.

Our investment management strategy is based on a dynamic core-satellite methodology, combining features of passive and active strategies. The dynamic core-satellite approach combines a broad market approach (the core asset allocation) with various, actively managed components (satellites). It offers the flexibility to design portfolios using mutual funds, exchange-traded funds (ETFs), alternative investment vehicles, and individual securities.

Identifying appropriate investment vehicles is a blend of art and science. As our macro view changes, we revisit our Core+ Satellite Strategy to determine which asset classes and sub-categories we believe will benefit from active management and where we believe passive exposure is most appropriate. Additionally, we combine our macro view with our asset allocations as part of our tactical overlay, under and overweighting specific asset classes and/or sectors.

Investment Management

Within our firm the investment committee includes our four advisors, meets no less than monthly, typically weekly to review global macro and geopolitical market events, market sectors, allocation weightings, a fundamental review of portfolio assets and reports prepared by our Director of Investment Operations. The investment committee reviews prepared analysis and votes on potential changes to be made to portfolios. The Director of Investment Operations then implements decisions elected by the committee and memorializes action taken.

Asset Allocation

Asset allocation is to be revisited:


Or when one of the following criteria occurs:

  • A security underperforms its primary benchmark for four consecutive quarters
  • A security’s style of category is changed
(at a minimum)

Or when one of the following criteria occurs:

  • Allocation falls out of a defined range
  • Client objectives or circumstances change
  • Significant assets are added/removed from the plan

Retirement Investing Philosophy

Retirement investing can be broken down into two phases, accumulation (pre-retirement) and distribution (post-retirement).  Good savers not only typically make maximum contributions to their retirement plans such as their 401(k) but also save after-tax money as well. This gives you options for distributions – you can balance taxable and tax-deferred distributions, thereby reducing income taxes and estate taxes later.

New rules under SECURE ACT, which became law on December 20, 2019, were far-reaching.  Some of the changes extended mandatory Required Minimum Distributions (RMD’s) from age 70 ½ to age 72, and it allowed traditional IRA owners to keep making contributions indefinitely.  Investment planning in retirement can be as simple as under-living your income and dollar-cost-averaging savings and investment. It also requires understanding your emotional relationship with money – spends less today, has a brighter future tomorrow. You work hard for your money – a sound investment plan helps your money work harder for you.  If your goal is to be financially independent, follow a consistent and well thought through investment plan, so work is not a necessity, it becomes your choice.

Phase 1: Pre-retirement

Investment Management Pre Retirement | McGee Wealth Management

The pre-retirement phase is for growing or accumulating assets  until the time of either income needs or a mandatory RMD distribution. Our younger clients who are making contributions to retirement plans through payroll deduction, in essence, are dollar-cost averaging sometimes 24 times per year dependent upon their payroll cycle.  They are investing at different price points automatically, thus “averaging” the price to mitigate market volatility. When discussing specific risk tolerance with clients, many want to be more growth-oriented due to their long-term time horizon.  They do not intend to use the funds for income for a number of years.

Since tax laws are continually changing, we must consider the tax impact when funds are withdrawn and the differences between selecting a Traditional IRA versus Roth IRA allocations.  Many 401(k) plans have the choice of allocation between the traditional tax-deductible contribution to the 401(k) or a Roth 401(k) non-deductible but tax-deferred contribution.  Since taxes are deferred within retirement accounts, we select investments through a screening process leaning toward actively managed managers when distributions of capital gains and dividends do not impact current taxes.  We then believe that asset allocation should be reviewed no less than annually.  Employer 401(k) plans have preset investment options; however, it is important to understand the risk of the underlying sub-accounts you choose and measure their performance over time.  No matter what the retirement account – 401(k), IRA (Individual Retirement Account), Profit Sharing, or a Simple Plan – we use our technology and our team of professionals to guide your decisions and monitor performance and risk over time as one of the services we provide.

We will walk you through the investment planning process to determine the right investment strategy for YOU. Together, we want to understand your specific situation – your investment views, history, short and long-term goals, and feelings about volatility and risk.  Do you need money now? When will you want to take income? When will you want to retire? What is your greatest fear about investing?  We will be thorough, and that is why we incorporate disciplined financial planning into our investment strategy conversations.

Your age plays a significant role in what investment plan we use.  It is about time and money.  Someone who has very little money but a lot of time to grow can be much more growth-oriented and take more market risk than someone close to retirement with investments that need certainty to provide for the future.  In this case, the person close to retirement needs to be keenly aware of volatility and risk. This pre-retiree does not have enough time to recover significant loss.  In our work for you, we measure the downside capture of the market, such as the S&P 500, as well as the potential for upside capture or return.  Portfolios are designed with statistical measurements of risk/return expectations.

Portfolio selection is made only after we understand you and your objectives.  Then we model the portfolio for diversification, measuring correlations among asset classes and sectors. Asset class diversification is represented as U.S. equities and bonds, international equities and fixed-income assets, cash and cash equivalents, real estate, and other alternatives. They can be individual securities or managed portfolios. What is essential is that they work together to give a measurable target for growth and risk.

Phase 2: Post-retirement

Investment Management Post Retirement | McGee Wealth Management

The post-retirement phase is for growth and to provide income. Money must last as long as you do and perhaps even into the next generation. This may be a more challenging time to manage money than in the pre-retirement accumulation period.  It seems more complex since there are various factors to consider, including the amount of money needed to support your cash needs, the RMD (which grows every year depending on age and the December 31st balance of your retirement accounts) and of course, taxes. We have found a common misconception that all funds need to and will be reallocated at the time of retirement. At MWM, as one of our core services we focus on financial planning and having enough cash flow and cash reserves to cover living expenses.  

How much is enough, you might ask?  Consider all income sources Social Security, retirement pension, rental income, stock dividends, retirement funds, and even part-time work after retirement.  Then we design financial planning to fit: cash and cash reserves (three years of cash flow);  bonds for the next level of income need perhaps three to five years, followed by equities for funds that will not be needed for 5+ years into the future.  This bucket approach sends your money on a mission to perform specific tasks over time.  Together, the asset allocation mix provides a distribution plan and also a plan to mitigate risk.  You buy time and have time on your side for growth in the equity portion of the portfolios.  It is important to ensure we have equity exposure for the ultimate goal of outpacing inflation and growing wealth.  We review risk tolerance with each client to ensure you are allocated to a portfolio that has a comfortable level of fluctuation so that clients can remain invested during all market cycles, even during downturns.

Our Taxable Investing Philosophy

The MWM strategy for taxable assets' investment management differs from traditional long-term time horizon investing of retirement funds. We watch for capital gains and dividend distributions and often incorporate municipal bonds depending on a client's tax bracket. When selecting investments for after-tax accounts, we will look for positions that are tax-sensitive.  Individual stocks, bonds, and Exchange Traded Funds may have a place in these portfolios.

When we use managed funds, we analyze the tax cost as part of our screening mechanism. When consulting with a new client during our discovery process, we complete a detailed discussion about allocation targets to find a comfortable long-term fit. Our goal is to have a well-allocated portfolio that does not require timing in and out of the market, instead allows you to stay invested long term with an eye on performance and volatility.

Our goal is to have a well-allocated portfolio that does not require timing in and out of the market.

After-tax investments are the most efficient to pass on to the next generation from an estate planning perspective. You cannot gift retirement funds in kind however you can gift a stock to a grandchild.  As investments grow over a lifetime, it is rewarding to be in a place of wealth where you can make a difference in your life and that of others.

ESG Investing

In today’s times, it has become increasingly important to know what you are investing in, why you are selecting that company, and how they act towards people and the earth.

ESG investing grew out of the previous Socially Responsible Investing (where investors used value judgments and negative screening to evaluate the companies they were investing in). Now investors focus on opting into companies that make positive impacts in the three-factor areas: Environmental, Social, and Governance principals (ESG). Our firm has been pleased to be a part of this change and are excited to see what the future holds. As a firm we have specific ESG portfolio construction as one of the services we can provide to fit the needs of our clients.


Environmental focuses on consideration of the natural world (climate change and carbon emissions, deforestation, water scarcity).


Social focuses on consideration of people and relationships (customer satisfaction, human rights, labor standards).


Governance focuses on standards for running a company or business (board composition, political contributions, lobbying).

Current key issues in responsible investing are:

  • Racial inequality (average household net worth by race/ethnicity)
  • Inequality in the share of wealth held by income levels
  • Gender diversity in the labor force and women in the boardroom
  • US wealth gap between men and women
  • Transition to a low carbon energy future
  • Water stress
  • Surface temperature increasing
  • Cyber-crime
  • The rising cost of healthcare worldwide

Among ESG investors, the most important concern from a client perspective is climate change, followed by clean technology, emissions, waste management, human rights, and cybersecurity.

We have seen a drastic increase in the number of S&P 500 companies reporting ESG data. In 2011 only 20% of companies reported, which was up to 90% in 2019. This shows us that businesses understand this is an expectation and requirement to have people comfortably investing in their companies. The days of acting a certain way as a company and mistreat people have diminished with transparency and enhanced access to information in the past ten years. Thanks to the internet and social media outlets like Twitter, Facebook, etc., a negative experience can be shared instantaneously with thousands of people.

Principles for Responsible Investment

Implemented by the United Nations Secretary-General, the Principles for Responsible Investment were developed by an international group of institutional investors, reflecting the increasing relevance of environmental, social, and corporate governance issues to investment practices.

Our Six Principles of Responsible Investment


We will incorporate ESG issues into investment analysis and decision-making processes.


We will be active owners and incorporate ESG issues into our ownership policies and practices.


We will seek appropriate disclosure on ESG issues by the entities in which we invest.


We will promote acceptance and implementation of the Principles within the investment industry.


We will work together to enhance our effectiveness in implementing the Principles.


We will each report on our activities and progress towards implementing the Principles.

United Nations Sustainable Development Goals

Implemented by the United Nations Secretary-General, the Principles for Responsible Investment were developed by an international group of institutional investors, reflecting the increasing relevance of environmental, social, and corporate governance issues to investment practices.

ESG Investing at McGee: The UN's Sustainable Investment GoalsESG Investing at McGee: 17 Sustainable Investment  Goals

1. Discretionary - Discretionary authorization will allow our firm to determine the specific securities and the amount of securities to be purchased or sold for your account without your approval before each transaction. Discretionary authority services are granted in the investment advisory agreement you sign with our firm and the appropriate trading authorization forms.

2. Modern Portfolio Theory - Modern portfolio theory was created and pioneered by Harry Markowitz with the 1952 publication of his essay “Portfolio Selection” in the Journal of Finance. Modern Portfolio Theory makes two key arguments: that a portfolio’s total risk and return profile is more important than the risk/return profile of any individual investment, and that by understanding this, an investor can build a diversified portfolio of multiple assets or investments that will maximize returns while limiting risk.

3. Risk Budgeting – Each asset in a portfolio comes with an expected return and expected risk. We analyze each asset's weighting relative to its risk and return contribution based on its weighted percentage of the portfolio. The objective is to spend risk prudently on assets that provide an excess return for the appropriate risk spent.

Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. Diversification and asset allocation  do not ensure a profit or protect against a loss. Dollar-cost averaging cannot guarantee a profit or protect against a loss, and you should consider your financial ability to continue purchases  through periods of low price levels. Mercer Advisors is neither a law firm nor a certified public accounting firm, no portion of this content should be construed as legal or accounting advice. You should discuss any tax or legal matters with the appropriate professional. Utilizing an ESG investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations.

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