Invest Like Our Index

Northstar Portfolio Management

If you like the investment philosophy of our index, we manage our individual client accounts in a manner that is consistent with the index. Essentially, we design our client accounts to track the index that we created.   The FNRI Index serves as the benchmark, and we buy the securities in the index in your individual account. This gives you the comfort of knowing exactly what you own, and gives us the ability to manage your accounts in a highly tax efficient manner. 

In general, we have a client relationship minimum of $750,000.  What that means is that we generally like clients to have $750,000 or more of investable assets that we can manage.  

If you’re interested in our retirement income management services, please feel free to contact Charles Farrell at cfarrell@northstarinvest.com or (303) 832 2300.  We welcome the opportunity to talk with you about our services.

What's the Difference Between an Index and a Portfolio?

Investors often ask us "what's the difference between an index and a portfolio?" and "how do you go about translating the strategies set forth in an investment index into a portfolio?"

An index is simply a list of securities that is designed to reflect a certain investment philosophy or focus. For instance, the Standard & Poor's 500 stock index is a list of 500 of the largest US companies, and the list is created and maintained by Standard & Poor's.  The basic goal of the index is to help investors understand how the price and value of those 500 companies are changing on a daily basis and then over longer periods of time. The primary criteria used to select the companies in the index is size. So if a company is large, it is likely to be in the index.

There are many indexes out there tracking different aspects of the markets or approaches to investing. For instance, the Dow Jones Industrial Average is a list of 30 companies maintained by Dow Jones. They add and remove companies at their discretion. And you may recall that within the last few years, General Motors and Citigroup were both removed from the index.  They also calculate the price of their index each day to help investors understand how the price and value of the companies in their index are changing over time.  But their approach is much different than the index approach used for the S&P 500.  Dow Jones only has 30 companies and has a much narrower focus on larger, industrial companies.

Then there other indexes that track things like energy stocks, consumer stocks, foreign stocks, and the list goes on.

One thing many investors don't understand is that you cannot invest directy in an index.  Remember, the index is a list of companies, it is not a security or portfolio. But what they can do is put together a portfolio of companies that are the same or similar to the ones that are in the index they like. So, if you like the Dow Jones Industrial Average Index, you could go out an buy the 30 companies in the index and attempt to track it.  Or if you like the S&P 500 index, you could go out and buy the 500 companies in the index. 

To make things easier on investors, there are various mutual funds whose objective is to track a certain index. Thus, you can invest in the mutual fund and get a portfolio that is designed to reflect the index holdings.

That's the difference between an index and a portfolio. The index is a list, and then investors must implement the approach by creating a portfolio of securities that is designed to track that index.

Our FNRI Index is a list of securities that focuses on a very specific thing: retirement income.  The securities are selected for their ability to meet the objectives we think are important for retirement.  As mentioned above, if you value that approach, then we can put together an individual portfolio for you that is designed to reflect the securities in our index.

 

 

Disclosure: The Farrell-Northstar Retirement Income Index is a list of fixed income and equity securities. The FNRI Index is for informational and educational purposes only. Investors cannot invest in an index and the FNRI Index does not represent an actual security or portfolio. Equity statistics are estimates and were obtained from Ford Equity Research for each individual equity holding in the FNRI Index. Historical dividend payments on the S&P 500 were obtained from Standard & Poor’s. Statistics for the master limited partnerships and energy trusts are excluded from the PE calculation as those securities have different financial structures that need to be analyzed under different valuation metrics. Past performance is no guarantee of future returns. FNRI Index returns have been certified by Standard & Poor's. Consult your individual financial advisor prior to making any financial decisions. Investing involves multiple risks, including but not limited to the permanent loss of capital.