Investment Philosophy

We take a dynamic view of the macro economy to determine expected returns in the near-term for various asset classes. Within these classes individual securities are carefully selected for clients’ portfolios on an account by account basis.

Clients’ assets are generally invested in individual stocks and bonds, eliminating costly mutual fund fees. We are a fee-only investment advisory firm and we do not receive commission nor do we sell any financial products. We believe that this structure eliminates any of the common conflict of interest that is prevalent on Wall Street. We are incented to put our clients’ interests first.

All client assets are held at an unaffiliated brokerage firm which provides independent monthly statements and other common brokerage services. GKV Capital does not take physical custody of client assets, but rather manages assets on clients’ behalf.

We do not buy and hold, but seek to take advantage of changes in market sentiment and fundamentals to avoid losses and capitalize on undervalued opportunities. As an independent portfolio manager we have the flexibility to adjust investment exposure rapidly.

As a portfolio manager, we have unique expertise in investment selection. Peter Vogel started GKV Capital in 1975 and has been managing client portfolios with individual security selection ever since. Greg Vogel, his son, joined the firm in 2002 after a very successful career as an Equity Research Analyst at Banc of America Securities where he was a Managing Director. Greg covered the software and internet industries during the height of the technology bubble.

Equity Investments

As a firm we do not have a particular bias toward growth or income stocks. Nor do we have a particular sector focus. For clients where income is appropriate, we will select high-yield companies that we believe will outperform their peers over the long-term. In more risk tolerant accounts we take a shorter term view and look to maximize the appreciation of the portfolio which often results in somewhat more frequent trading.

Based on the economic outlook and relative valuations of stocks, we will adjust investments and cash positions as necessary. As a small firm, GKV has the flexibility to move quickly in an effort to minimize losses and seek out stronger sectors and better performing stocks. Unlike mutual funds, we have no limitations keeping us from holding significant cash positions when the outlook for stocks turns negative. For appropriate clients, GKV does have significant expertise in employing hedge strategies, generally through the use of put and call options.

Fixed Income Investments

GKV is continuously in the market on behalf of our clients for municipal and corporate bonds. A significant percentage of GKV’s assets under management are invested in publicly traded fixed income securities. The firm has a substantial knowledge of government agency, municipal and corporate bonds. Bonds are purchased individually for clients to build portfolios that meet income and capital preservation requirements. Bond portfolios are usually staggered and weighted in their maturities to reflect our judgment regarding numerous variables, such as inflation, economic growth and interest rate expectations.

We analyze each bond purchase to maximize yield for our client relative to risk and portfolio objectives. Fixed income portfolios are managed for both income and capital appreciation, requiring forecasts of the pending economic environment and direction of interest rates in the near future and long term.

For select clients we will utilize more complex fixed income derivative instruments with structured products that include features with exposure to foreign currencies, interest rate yield curves and equity market participation. Please ask us about these techniques to further diversify your portfolio and increase performance.

A Few Common Investment Myths:

Don’t try to time the market, just buy and hold

In the last decade buying and holding stocks has resulted in losses. From 2000 to 2012 the S&P 500 declined 24%. Market timing is difficult, but there are periods where astute investors can shift the allocation of various asset classes and industry sectors to minimize losses and capture greater returns. Markets are generally efficient, but investors are influenced by emotion, bubbles do exist and opportunities can be capitalized on.

Mutual funds are an efficient way to invest

Mutual funds are expensive. Fees are taken directly out of the net asset value of the fund. These fees are in addition to the fees paid to your broker or financial planner. Mutual funds tend to lag in performance the broader market indices. Lastly, mutual funds do not adjust their strategy for the current economic environment. A technology fund will stay 100% invested in technology even if the fund manager knows technology stocks are overvalued and will decline in value in coming months.

I own big-cap, small-cap and foreign stocks, I am diversified

Diversification is important to smooth returns in a portfolio and to reduce risk from declines in any one asset class. However to be diversified, asset classes should be negatively correlated. In the global economy that exists today, foreign equity markets are very closely correlated to U.S. equities providing little protection from losses. In the financial crisis of 2008, U.S. stocks, foreign stocks, bonds, commodities and real estate all declined in tandem. Only cash and a few defensive commodities, such as gold provided safety. There are times when investors should reduce one asset class in favor of another or even exit altogether and raise cash.

Bond funds are relatively safe

Only by buying individual bonds is your principal protected by the issuer. There is no such protection to your investment in a bond fund. In 2008, as the financial crisis unfolded, bond funds declined significantly in value along with equities. Bond holders in solvent companies and municipalities lost no principal as long as they held bonds to maturity.

At my age I should have a 60%/40% mix of stocks and bonds

The relative attractiveness of different asset classes varies drastically over time suggesting that value oriented market timing can be profitable. A portfolio needs to be protected against losses and positioned to capture gains for taking some level of risk. There is no perfect ratio of asset class mix for a particular age bracket. We look to create the ideal portfolio that balances the risk and reward for the current market environment.