Building a Portfolio for Your Investment Voyage

Our Personalized Process

Portfolio construction is an essential wealth planning element that is key to achieving long-term financial goals. And while it can sometimes be described as a science, portfolio construction is also very much a carefully executed craft. The goal is to build a portfolio centered on your investment goals and time horizon to reach them. Both are unique to you and must be balanced with an understanding of your risk tolerance and how those factors could potentially impact your investment objectives.

An understanding of these factors allows our team to determine your portfolio’s recommended asset allocation between the major asset classes of equities, fixed income and cash. At Baird Trust, we have developed a long-term strategic asset allocation focused on a Core + Satellite approach. The Core of our equity allocation is invested in large-cap stocks, utilizing our Large-Cap Equity strategy or our Equity Income strategy. The minor asset classes of small-cap, international developed and emerging market stocks serve as the portfolio’s Satellite allocations. A portfolio’s fixed income investments serve a dual role: generating a reliable source of income and stabilizing force within the overall portfolio. Understanding your tax position will determine if the fixed income allocation should be centered on taxable bonds or federally tax-exempt municipal bonds. For trust accounts, the portfolio construction process must also consider the needs of your current and future beneficiaries. Current beneficiaries receiving income distributions from the trust are often focused on maximizing the income produced from the portfolio. However, the remainder beneficiaries benefit from the capital appreciation of trust assets. This delicate balance between different, and sometimes conflicting, groups of beneficiaries is a unique aspect when managing the investments in trust accounts. Trust portfolios are thoughtfully constructed considering both interests: to produce current income and long-term growth.

Our Core + Satellite Approach

The investment management work does not end once the portfolio is constructed, though. As markets advance and decline, rebalancing the different asset classes back to their original allocation targets can prevent portfolio drift that could alter the long-term risk and return profile of your portfolio.

Active portfolio management also seeks to achieve the best after-tax return. To accomplish this goal, we aim to minimize capital gains realized in the portfolio. Reducing portfolio turnover aligns with our belief in investing in securities for the long-term and not trading them to make tactical bets on the market. In addition, we monitor your portfolio for meaningful tax-loss harvesting opportunities. Tax-loss harvesting allows us to offset realized capital gains during the current tax year and potentially carry them forward to offset future capital gains in your portfolio.

We take a long-term approach in our portfolio management process and understand that your goals and needs evolve over time. No one can predict the future with certainty, but a properly constructed portfolio attempts to achieve your goals over the long-term through both bullish and challenging markets.

And it’s in these challenging markets that we believe the merits of a properly constructed portfolio help our clients stay the course to reach their long-term financial goals. Renowned investor Warren Buffett once said, “It’s not predicting the rain that counts, but being the one who builds an ark.” And while many of our portfolio managers hold distinguished degrees and professional designations, a meteorology degree is not one of them. Therefore, we believe a portfolio should be constructed to not only sail you toward your investment goals in calm markets, but also to withstand the financial storms that will inevitably roil the markets.

Baird Trust Company (“Baird Trust”), a Kentucky state chartered trust company, is owned by Baird Financial Corporation (“BFC”). It is affiliated with Robert W. Baird & Co. Incorporated (“Baird”), (an SEC-registered broker-dealer and investment advisor), and other operating businesses owned by BFC. The information offered is provided to you for informational purposes only. Neither Baird nor Baird Trust is a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page is subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor. Investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor or a member of your Baird Trust team before taking action.

Certified Financial Planner Board of Standards Inc. owns the certi ficati on marks CFP®, CERTIFIED FINANCIAL PLANNER® and federally registered in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirement. Robert W. Baird & Co. does not provide tax or legal advice.