Investment Risks

Risk involved in our investment strategy

Despite our belief in the long-term desirability of focusing capital in a relatively few securities, concentration can expose your portfolio to greater company-specific and industry-related risk, especially if one or more particular investments performs poorly. You should consider the risk that greater concentration poses, weigh it against the possible benefits (which are not guaranteed and may not occur), and seek investment advice elsewhere if you would prefer a more diversified approach.

Even a diversified portfolio of stocks can suffer losses, of course. Risk to equity investments can come from declines in the whole stock market, or from declines to particular sectors or individual securities. Global, national, and regional economic risks, such as war or recession, can also cause losses. Industry-specific and company-specific problems, such as changes in the nature of a business, or adverse legal or regulatory developments, are possible causes of loss as well.

Investments other than common stocks can also suffer losses. For example, fixed-income instruments (such as bonds, notes and bills) typically decline in value when interest rates rise (and increase in value when rates decline). Also, the bonds of a company that suffers a credit agency rating downgrade, or that cannot make scheduled bond payments, will generally decline in price.

Inflation may erode the purchasing power of an investment. It is possible that an investment that has returned a positive amount in nominal terms may not have kept up with inflation, particularly after taxes, and thus could still have a negative “real” (inflation-adjusted) return.

Our firm is highly reliant on the availability of the services of our founders, Brennan Merrell and Ryan Merrell. Should their services become unavailable to us, we may choose to cease operations after notifying you.

Again, we do attempt to make investing productive financially for you, but there are risks of the kind we have enumerated, so there can be no guarantee of success.

Risk involved in our security selection

While we may provide advice on a number of different types of securities, our primary focus is on exchange-listed and over-the-counter equity securities and United States government securities.

As discussed above, the securities that we focus on carry systematic risk (associated with fluctuation in the general level of securities prices and overall market risks), and unsystematic risk (associated with individual events that affect a particular security). Even a security we analyze properly may lose money for our clients. We analyze securities in good faith, but our judgment may be incorrect, causing losses for our clients.

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