Key Principles of White Lighthouse Investment Management
We will be guided by the approved Investment Policy Statement.
We will not try to time the markets.
We will create a globally diversified portfolio.
We will use a customized asset allocation, balancing return and risk.
We will look for low to moderate costs, high quality, liquid investments.
We will principally use ETFs (Exchange Traded Funds) because they are:
Very low cost
Tax Efficient (in the US)
Offer a wide variety of asset classes
Administered by high quality organizations (e.g., Vanguard, BlackRock, etc.)
We will rebalance the portfolio’s asset allocation as needed: reviewing at least four times annually.
And as needed due to large changes in portfolio value or significant life changes. For Example: Job loss, retirement, large deposit or withdrawal etc.
We will principally purchase Investment Grade Fixed Income Securities individually or in ETF format.
We will recommend tax management transactions (tax loss harvesting) if they can lower taxes and if they fit with the overall client needs.
We strive to trade as little as possible, while balancing the investment management objectives, to keep transactions costs low for our clients.
Investment markets are inherently volatile, both bond and stock markets. A long time horizon allows investors to ride out the volatility; Short term cash needs are best kept in cash in the currency needed. The higher the expected return the higher the risk of an investment.
Expectations for a market decline
| Depth of Decline | Total Occurences | Frequency | Average Time to Recover |
|---|---|---|---|
| 5-10% | 46 | Once per 1.5 years | 2 months |
| 10-15% | 12 | Once per 6.5 years | 5-6 months |
| 15-20% | 4 | Once per 20 years | 4 months |
| 20-45% | 9 | Once per 8.5 years | 1.5 years or 18 months |
| >45% | 3 | 1 time every 26 years | 5 years |
As of June 2025, we’re in the middle of a recovery from a ~18% decline, the recovery time is therefore not included. The above declines are based on the S&P500’s adjusted closing price between 1946 and 2025 and do not include dividend yield. Recovery time is measured from the day the decline threshold was met to the S&P500’s new maximum value. A decline of 10% is not considered two 5% declines.
| Declines of >45% | ||||
|---|---|---|---|---|
| Max Drop | Day Decline Hit -45% | Day Recovered | Total Days | Cause |
| 48.20% | September 13, 1974 | July 17, 1980 | 2,134 | High inflation and unemployment |
| 49.15% | July 22, 2002 | May 30, 2007 | 1,773 | Dotcom bubble bursts |
| 56.78% | October 27, 2008 | March 28, 2013 | 1,613 | Global financial crisis |
Expectations for a market decline
(Past performance is no indication or guarantee of future performance.)
| Last 10 Years | 11.19% |
| Last 20 Years | 8.32% |
| Since 1957 | 10.33% |
| Since 1928 | 9.96% |
** The above returns are for a very HIGH RISK 100% Equity Index (the S&P 500).
Source: Investopedia
Key lessons from this information
A long time horizon is important (5-10 years or more)
Corrections are frequent
Corrections do not generally last long (if you have a long time horizon)
Corrections can be a good time to Buy and a bad time to Sell, but profiting from market timing is difficult and should not be a key driver of strategy
Performance Expectations
We follow Modern Portfolio Theory’s belief that diversification is the best way to increase your risk-adjusted returns. (Awarded the Nobel Prize in 1990)
We principally use ETFs, which are passive and linked to the performance of an index.
We choose ETFs with low costs and low tracking errors.
Therefore, the returns you will receive are linked to the performance of the indexes and markets that the ETF’s follow.
For Example: The S&P 500 ETF we often use is VOO (Vanguard S&P 500 ETF Index Fund). This fund has tracked the S&P 500’s performance to within 2 to 6 basis points plus or minus. It charges a 3-basis point fee so you should expect it to trail the index by roughly 3 basis points. $0.30 per $1,000 invested.
This same philosophy applies to all the ETF’s that we use. As a result, your portfolio’s performance is a combination of the performances of many indexes, including Bond Indexes, which means you should avoid making a single comparison to, for example, the Dow Jones Industrial Average, the SMI, the FTSE or the DAX.
The country’s location of a Stock’s listing or Headquarters does not directly tie its performance to that country or its currency. Large multinational companies, which comprise the majority of stock index values, do business globally and in many currencies. Additionally, if returns are measured in different currencies, this is a different scale and will not match US Dollar calculated returns.
In conclusion, White Lighthouse is not trying to beat any specific index. Our goal is to provide you with a better risk adjusted return based on your goals and objectives. We use diversification to smooth out the ride and ensure we stay on strategy. If the markets go up, your portfolio will rise as well and if there is a correction in the equity markets your equity ETF’s will likely fall significantly.