FAQ

  1. What is an Investment Counsel?
    An Investment Counsel is an individual or business that offers financial and investment advice. The term is interchangeable with “financial advisor”. SFE prefers counsel to advisor because it expresses a deeper client relationship.
  2. What is a composite?
    Technically, a composite is a group of securities, indices or portfolios grouped together so that investors can compare their characteristics. At SFE, we group our client accounts according to investment objective. We do this according to the guidelines set forth in the Global Investment Performance Standards (GIPS). This allows potential clients to compare SFE’s historical performance against other managers, mutual funds and broader market indices, like the DOW Industrial and the S&P 500 (both of which are also composites).
  3. What is a Separately Managed Account?
    A Separately Managed Account (SMA) is actually an industry term that means just what it says. These are accounts in which the client directly owns the securities, as opposed to a mutual fund, in which the ownership is indirect (the fund owns the securities; the investor owns shares of the fund).

    SFE actively manages separate accounts for our clients. This allows us to customize each portfolio for each client. There are also significant advantages in terms of managing tax liability in separate accounts.

  4. What is an “Investment Policy Statement”?
    An Investment Policy Statement (IPS) is a document that captures the goals and objectives of the specific client, which guides the investment decisions SFE makes on their behalf. Many institutional clients come to us with a well-developed and current IPS. Others ask us to help them to design or update a working document. SFE also believes that an IPS is important for each individual investor, so we spend some time reviewing the client’s financial condition and investment priorities as the first stage of each new relationship. We then periodically revisit and update the IPS during the course of the relationship.
  5. What is a “concentrated portfolio”?
    In the investment industry, a portfolio is more or less “concentrated” depending on the number of securities it holds – those with fewer securities are more concentrated than those holding more securities. Depending on the size of the account, SFE portfolios hold between 20 and 30 (approximately) stocks, a number which is well below the average mutual fund, which may hold between 120 and 150 stocks, or more.
  6. What about diversification?
    Conventional wisdom holds that more diversification is better. However, this maxim applies primarily to “safety” or protection from volatility, and less to performance over time. SFE’s belief (which is supported by research) is that over-diversification leads to returns that mirror the overall market. Our track record shows that a portfolio with 20-30 carefully selected and closely monitored stocks allows for out-performance and limited volatility.

    SFE achieves diversification in our concentrated portfolios by combining stocks from all industry sectors and market capitalizations. Further, we balance growth opportunities with more established companies that pay dividends – thus the name Growth & Income Strategy.
  7. What does “total return” mean?
    SFE’s Total Return approach to investing refers to our conviction that both price appreciation and dividends are important to achieving attractive returns over time. Stated as a formula: Stock Price Increase + Dividends Paid = Total Portfolio Return.
  8. What is the minimum amount required to open an investment account with SFE?
    For individual investors, our minimum account size is $100,000. At this level, we can create a portfolio of 20 securities, which provides appropriate diversification within our Growth & Income framework. For a variety of reasons, our minimums are higher in our Wholesale and Institutional programs. Contact us directly for more details.
  9. Does SFE manage IRA Rollovers?
    Yes, subject to our $100,000 minimum account size.
  10. Does SFE Manage 401(k) Plans?
    Yes. We currently manage the investments for several small business retirement plans. We can work within your current program or help you set up a plan with a third party administrator.
  11. What is GIPS?
    GIPS is an acronym for Global Investment Performance Standards. These are a set of policies and practices related to the capture, tracking and reporting of investment performance. SFE adheres to these standards and our compliance is verified each year by and independent verification firm. Contact SFE directly for more information or to receive verification letters.