Welcome

Welcome to the blue chip portfolios community!

I have been investing personally for over 18 years and have learned a lot along the way. In addition to learning through my own investing experiences, I have had the opportunity to learn through career experiences including time spent working at PIMCO where I helped manage fundamental and systematic strategies across hedge fund and mutual fund portfolios, time spent working at Greenhill in the restructuring and financing advisory group, and internships during the early part of my career with Greycourt & Co and the U.S. Department of the Treasury. I am also a CFA Charterholder and received my MBA at NYU Stern.

My goal in launching blue chip portfolios is to build something that can help you gain a leg up on Wall Street. I plan to provide insights which are useful for all levels of investors including individuals investing on their own and individuals using an advisor.

While most individuals tend to hire high priced investment advisors, my view is that individuals in some cases have the ability to deliver superior outcomes by managing their own investments due to the cost advantage. In today’s world, it is not uncommon for investors to pay as much as 1% in annual investment management fees.

While 1% does not seem like a lot, it is very large in the context of 8-9% annual returns.

In addition to saving on investment costs, the environment has never been better for individuals who are managing their own money. Transaction fees have plummeted with many firms now charging zero commissions on stock and ETF trades. Lower commissions have made it much more efficient to be an active investor than was previously the case. Additionally, markets are more efficient than ever due to the growth in the number of hedge fund and active mutual fund managers in the market. In my view, the greater level of market efficiency means that the savings of investment costs is an even more significant driver of total performance than had previously been the case. Morningstar recently put out data regarding active funds success rates. While active fund success rates differ to some degree based on the product offering, the picture is clear: on balance active managers have not outperformed their benchmarks on an after-fee basis. For example, just 9.8% of U.S. Large Blend equity funds have outperformed their benchmarks over the past 10 years.This suggests that inefficiencies in the markets are generally outweighed by high management costs in the long-run and lower fee products tended to perform better than higher fee products. 

Finally, another reason why the investing landscape has shifted to favor the individual investor is the emerge of ETFs to gain exposure to opportunities that were previously only available to institutional investors. Some examples include trend following ETFs such as KFA Mount Lucas Index Strategy ETF (KMLM), volatility risk premium ETFs such as Simplify Volatility Premium ETF (SVOL), structured credit ETFs such as BlackRock AAA CLO ETF (CLOA), and capital efficient ETFs such as U.S. Efficient Core ETF (NTSX).

My belief is that investors will do very well over the long-term owning select blue chip equities compared to other investment opportunities. Blue chip companies — and how they can be used to build portfolios with different investment objectives— will be one focus area of my analysis. In future articles, I expect to discuss why blue chip stock such as Microsoft (MSFT), S&P Global (SPGI), and BlackRock (BLK) are large parts of my portfolio. I will also discuss why well known companies such as General Motors (GM) and Tesla (TSLA) are not part of my portfolio.

In addition to talking about stocks, I will also be discussing ETFs and how they can be used to build high quality portfolios. I will also discuss topics such as tax efficient investing, whether or not gold should be part of a portfolio, estate planning considerations, and many other topics.

I look forward to once again interacting with each and every one of you and hope to make this newsletter a worthwhile read for you.

Sam Pollack

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