By Elmer L. (Al) Meszaros, CFA, Partner

Back in June, 1952, a young graduate student at the University of Chicago authored an original work on portfolio selection. Although it wasn’t until 1990, Harry M. Markowitz received a Nobel Prize in Economic Science for that effort. His key insight was the strategic role of diversification among investments to reduce risk, which he defined as volatility of returns. Volatility is a bad thing when it causes emotional investors to abandon their long-term plan.

Using the Markowitz strategy

At Midwest Investment Management, our “Best Funds” program implements Markowitz’s prize winning insight for our clients. We diversify among six different asset classes and styles (i.e., large company, small company, growth, value, international, and bond funds).

Objectivity and low costs

Our “Best Funds” program is for small-to-medium-sized accounts, including IRAs, Roth IRAs, 401(k) rollovers and corporate 401(k) programs. We use only low-cost, no-load funds and since we do not accept payments from any fund companies, we are totally objective in choosing the most talented managers from over 8000 choices.

We have selected 18 proven mutual fund managers who we think of as an 18-piece orchestra ready to perform. We actively monitor each fund’s performance and rebalance client portfolios as needed.

We also like to meet with the fund managers personally. Recently, for example, we met with two fund managers – Tim Miller who runs a high-performing growth fund of 150 high-quality, fast-growing, mid-sized companies and Bill Nygren who manages a concentrated portfolio of 21 “deep value” stocks. Blending these two very different styles should result in lower volatility, resulting in a “smoother ride” for our investors.

If Harry Markowitz’s strategy for reducing investment anxiety appeals to you, why not investigate the program offered by our “18- piece orchestra” of fund managers?

For more information about the “Best Funds” program, contact Al Meszaros at (216) 830-1133 or e-mail: elm@mimllc.com.

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Perspective is published quarterly by Midwest Investment Management LLC, Cleveland, Ohio for its clients, friends and members of the business community. All information contained herein reflects the opinions of the authors and does not necessarily constitute investment advice. Past results are no guarantee of future performance. ©2000, Midwest Investment Management LLC. All rights reserved.