FAQ

Is the defensive strategy an “active” strategy?

Yes. Stillwater Investing utilizes diverse, low-cost options to cover various segments of the investable universe. We shift investments strategically based on broad/macro market indicators. When the market gets greedy, we start getting fearful. When the market gets fearful, we get greedy. This strategy works well with dollar cost averaging.

What is dollar cost averaging?

Dollar cost averaging refers to adding a steady amount of money into your portfolio regardless of market conditions. Many working clients would do well to add a set amount on the first of each month. If an individual/organization’s earnings change, contributions can be adjusted.

Why should I pay more for active management if the defensive strategy is also an “active” strategy?

Some individuals/organizations have special needs that require more attention from your advisor. Special needs may mean hedging against rises in interest rates, oil, or gold, for example. Our active management fees are higher than our defensive strategy in order to accommodate the increased research required and complexity of trades.

Why is there a 10% performance fee for active management accounts?

The 10% performance fee represents a little cheddar for a job well done. Want an advisor to stay up all night worrying about your account? Pay them a performance fee. A performance fee also means that your advisor doesn’t get paid if you don’t get paid. The performance fee is calculated quarterly if annualized returns exceed 6%.

What are your thoughts on cryptocurrency? Can you help me add cryptocurrency to my portfolio?

Cryptocurrency doesn’t produce anything, has no cash flow, and thus has an intrinsic value that is completely dependent upon other speculators buying it from you. Money can be made by selling it to someone else for more than you bought it for, but that doesn’t mean it has intrinsic value.

Cryptocurrency could be useful for a temporary storage of wealth. If I was exiting China without government permission, Bitcoin might be a safe/convenient choice. With its volatility, its value could go up or down substantially when converted back.

If a client wants exposure to cryptocurrency, we can offer Bitcoin and Ethereum futures for actively managed clients. We consider cryptocurrency to be speculative in nature and not suitable for long-term investment.

I have a friend who has made a bunch of money day trading. Why should I pay for an investment advisor if I could just follow his advice?

Answer: When I was in the Navy in 2001, I went to a casino in Croatia with a fellow sailor named Alexander. He walked in sober with $400 American dollars. After a few hours, he was having some good luck and started upping the wager to $100 a hand. Then, he started playing three $100 hands of blackjack at the same time. At the time, Alexander was making around $40,000 a year, and in four hours he was up over $24,000 and very intoxicated. I knew the trouble had started when he started repeating his mantra, “I’m going to roll them”. He walked out of the casino with nothing.

Trading isn’t about how you start; it’s how you finish. It’s what you walk away with after you leave the table that counts. Speculating and day trading can get staggering returns, but does your friend understand the depth of the risks he’s taking? Speculating is like spinning the roulette wheel. Investing is owning it.