How We Invest

We believe in giving investors the best possible chance of harvesting the returns available in global markets. It is a seemingly simple idea, but actually it requires a highly disciplined view of fees, taxes, diversification, and human behavior.

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The Twin Problems

Aside from spending and taxes, the two biggest drains on wealth have historically been high costs and low diversification.

The finance industry has a tendence to overcharge for investment products, so you’d think that the solution would be low-cost indexing. But despite its low fees, index investing has its own flaws.

First off, it simply goes against human nature to sit and wait while markets veer through booms and busts. But our research shows this isn’t just a human nature problem: it’s a financial one.

THE ELM SOLUTION

Our rules-based system is responsive to market conditions and removes as much of the human behavioral element as possible.

It makes intuitive sense to take on more market risk when your expected returns are high, and to reduce exposure to market risk when your expected returns are low. Our research indicates that it isn’t just intuition: being dynamic can have a demonstrable impact on long-term performance.

We took that idea and turned it into an implementable investment strategy—one that’s practical to manage, and extremely cost-effective.

We call it Dynamic Index Investing. Learn more

Our Approach

1

Automated

Our rules-based algorithm is fully-automated for simplicity, cost-effectiveness, and freedom from behaviorally biased decision-making.

2

Dynamic

Our approach is dynamic, increasing market exposure when expected returns are high and reducing it when expected returns are low.

3

Globally Diversified

We prioritize global diversification, with a focus on equity markets as the primary source of long-term growth.

4

ETF-Based

We use ETFs to build portfolios for their diversification benefits, low-costs, and tax efficiency.

5

Tax & Fee Sensitive

Our approach prioritizes tax efficiency and our fee is set to an extremely competitive 0.12% per year.

Talk to Elm

At Elm, we believe we offer something better:

Sensible Approach

Focusing on practical and sustainable long-term wealth management

Sophisticated Framework

Offering a thoughtful, research-based methodology and client resources

Credible

Providing personal guidance on investing and other important life decisions

Learn more about Elm and start managing your wealth for the long run.

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Baseline Weights: The Baseline defines the strategy's 'average' asset allocation over a long period of time, and serves as the reference point for Long-Term and Trend deviations. The Baseline represents the asset-allocation that a prospective investor would choose were they seeking a static strategy. See here for more information about the Baseline construction methodology.

Target Weights:The target weights used in the periodic portfolio rebalancing. Portfolios may not be rebalanced exactly to target, as Elm's execution engine tries to find a parsimonious set of trades which get as close as possible to target weights while also minimizing transaction costs, tax costs, etc.

Target Weight Breakdown:

Expected Return: The target weight resulting only from the Expected return-based metric. We want target weights to be proportional to the Expected excess returns, while staying within 2/3 above or below the bucket's Baseline Weight.
Risk: The deviation caused by the Risk Metric. We want a positive Deviation in lower-risk environments, and vice versa. The size of Risk-based deviation can be at most 1/3 of the bucket's Baseline Weight.
The Target Weight is equal to the Return + Risk components in the Breakdown.

Expected Return Metric:

Equities: 1 / CAPE - 10y TIPS Real Yield (Excess Expected Return in excess of the long-term risk-free rate)
Fixed Income: 10y TIPS Real Yield
For a small number of asset buckets we use slightly different signals than described above, and a few buckets use secondary metrics as well. Please contact us for details if you're interested.

Risk Metric:

We use a momentum signal as a proxy for the risk-environment: positive momentum indicates a low-risk environment, negative momentum indictse a higher-risk environment.
Balanced: Spot Asset Class Total Return Index / 1y-Avg Total Return Index
(All indexes adjusted for inflation and risk-premia)
All-Equity: [Spot Asset Class Total Return Index / 1y-Avg Asset Class Total Return Index] - [Spot Baseline Total Return Index / 1y-Avg Baseline Total Return Index]
(All indexes adjusted for inflation and risk-premia)

Disclaimer

Elm Partners’ Funds are available only to accredited investors. The content of this website and related materials are not intended to solicit investment, but rather to elicit discussion and exploration of better ways to invest. The contents of this website do not comprise an offering document. Neither historical simulations nor past return performance are necessarily indicative of future returns. Elm Partners Management LLC is an investment advisor registered with the SEC. Here are the most recent copies of our Form ADV Part 1, ADV Part 2A2B and Form CRS.

Fidelity Investments (“Fidelity”) is an independent company, unaffiliated with Elm Partners (“Elm”). Fidelity is a service provider to Elm. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by Elm and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered trademark of FMR LLC. Fidelity InstitutionalSM provides clearing, custody, and other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 830247.3.0

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