WILLIAM ROBERT NELSON
I founded 4 Alpha to help individuals, including myself, avoid the most common investing mistakes such as mistiming the market, overpaying for investment services, and owing too much in taxes. Invest just like I do.
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ARE ANY OF THESE FEELINGS FAMILIAR?
Compelled by constant concern to check your account value
Confused regarding what you own
Worried and unable to sleep at night, especially during volatile markets
Skeptical regarding your investment advisors’ motives
IF SO, I BELIEVE WE CAN HELP YOU, IN PART BECAUSE MY OWN MONEY IS INVESTED WITH 4 ALPHA RIGHT BESIDE THE INVESTMENTS OF OUR CLIENTS.
1 - The stocks you own
2 - The costs you pay
3 - The taxes that owe
4 - Your trust in your experts
YOUR INVESTMENT RETURNS WILL BE DETERMINED BY FOUR MAIN FACTORS
I strive to provide extra returns in all four ways, and “alpha” in financial jargon means extra returns, hence 4 Alpha Investment Management. All four forms of alpha are explained below, but first, let me explain WHY I created 4 Alpha.
Between 2007 and 2018 I co-founded and was Chief Investment Officer of a financial technology and investment management startup. That company grew to tens of thousands of clients and billions of dollars under management. As Chief Investment Officer, managing other people’s money was a purely intellectual, almost academic exercise. Our team followed best practices consistent with the modern academic literature. Despite our efforts clients often became fearful and pulled money out of the stock market. These emotional decisions often times caused lower returns than adhering to the planned investment strategy.
Fighting Investors’ Fears, Mine Included
I FINALLY UNDERSTOOD OUR CLIENTS...
Until 2016, essentially all of my net worth was invested in the company, but in early 2016 that changed when I sold some of the company to a private equity firm. Suddenly, I had to invest my own money and found that investing was no longer primarily intellectual, but rather was highly emotional. I finally felt what our clients had been feeling all along. I finally understood why our clients got frightened out of the stock market. Experiencing what clients experience and empathizing with them provided the insight necessary to create 4 Alpha Investments. 4 Alpha is designed to address both the financial and emotional needs of investors. Paramount to 4 Alpha’s mission is that I manage clients’ money exactly as I manage my own. I choose 4 Alpha to manage my own money. 
Deeply rooted in our primitive psyche is the fight or flight response. Humans developed this acute stress response in order to survive. Unfortunately, our proclivity to protect against hazard, often by running away, makes humans genetically unsuited for investing. When markets get scary our instincts tell us to sell. Fight or flight causes scared investors to sell at the wrong times. Arguably the world's greatest investor, Warren Buffett advised, "Be fearful when others are greedy and greedy when others are fearful." Unfortunately, most investors succumb to their primal instincts and fail by doing exactly the opposite.
ARE YOU INVESTING SMART?
HOW MUCH CAN 2% PER YEAR COMPOUNDED MEAN?
Running out of money is the most common fear of retirees and for good reason. Many Americans feel retirement insecurity, especially when the federal government’s ability to fulfill its social security promises is uncertain due to massive underfunding. Accordingly, responsible families are investing more to eliminate their reliance on Washington. Some investors succeed, but unfortunately many will fail to grow their savings enough to attain retirement security.
Investors may potentially achieve returns of 2% per year higher than typical actively managed mutual funds by using strategies such as carefully selecting stocks, reducing costs, improving tax efficiency, and reducing emotional decision making. 
You might scoff at a 2% improvement, but over decades 2% can compound to shocking increases in wealth. Over 40 years, earning a 9% return rather than a 7% return leads to over twice as much growth. A 4% rather than a 2% return leads to over three times as much growth.  Accordingly, if markets perform poorly, it’s even more important to control costs and taxes. And yes, 40 years is conservative, because men who reach 65 have a life expectancy of 83 and women 85 ½ . 
An increase in your return could easily be the difference between peace and stress, between sending your grandchildren to college or having to say no, between spending winters cruising in comfort versus contending with cold.
This graph represents hypothetical compounded returns and does not reflect the returns of 4 Alpha actual or expected in any way.
RISK AND RETURN
All stock market investments have the potential to lose money. I’d be remiss not to talk about risk with potential investors in 4 Alpha. If you invest with us, you might lose money, especially if you get scared into selling during a stock market decline. The stock market rises and falls in unpredictable ways, so unpredictable that there’s scant evidence that anyone knows what’s going to happen next, especially in the short term. As a general rule, 4 Alpha does not try to guess the direction of short term market fluctuations, but rather buys stock in companies we believe will excel in the long-term.
My grandmother, Marianne, taught me “Money does not buy happiness, but it can provide the freedom that makes finding happiness a lot easier.”
How You Can Get the Four Performance Factors?
Regardless of the type of stock market investment, the same performance factors apply: stock selection, costs, tax efficiency, and your trust. I refer to these as the 4 alphas. Accordingly, when you invest in mutual funds, ETFs, and separately managed accounts (like 4 Alpha) you should consider these four characteristics.
ALPHA 1: STOCK SELECTION
Which stocks you own obviously impacts how much your investments earn. 4 Alpha focuses investments in dominant companies, loved brands, and great products that are understandable, inspire confidence, and are on the right side of long-term trends.
The long term trends include, but are not limited to, the electrification of vehicles, renewable energy (as opposed to fossil fuel dependence), autonomous vehicles, biotech, genetic engineering, the growing global middle class, the move from a purchase to a service model, the reduction in the importance of location versus other amenities, the increase in e-commerce accompanied by reduction in conventional retail, proliferation of online platforms, increased economies of scale, aging of developed nation populations, healthier eating including veganism, direct contact between micro-producers and clients, and the reduced influence of traditional push marketing.
In addition, I apply an augmented version of the Porter Five Forces model to determine whether companies are likely to maintain margins and grow to a size that enables further appreciation of the stock price. The five forces that are considered are the negotiating power of suppliers, current competition in the market, the availability of substitute products, the threat of new entrants into the market, and the negotiating power of customers.
Some questions I reflect upon prior to investing in a stock include:
● Will this company have higher revenue in 10 years?
● Is it very challenging for competitors to enter the industry and successfully compete?
● Do shoppers demand this brand rather than comparison shop with competitors?
When the answers to these questions are “Yes!” then the company passes my sleep test. Because, when the stock price of these companies declines, we still sleep like babies. Low prices are an opportunity to buy more stock, not lose sleep to anxiety and stress.
ALPHA 2: COSTS
I believe that investors in these companies should share my confidence, experience enthusiasm in ownership, and remain confident when other investors are panicked.
A small portion of investments will be in smaller companies that I think are positioned for dominance and thus massive profits.
Remember, I own the same stocks you do.
Keeping costs low is critical to investment success. Most companies will tell you all the great things they do and then surprise you with exorbitant costs. Or, maybe they offer a fair price, but later you learn about additional resort fees, taxes, or convenience charges. I hate that. We keep it simple by charging $3.50 per month 0.55% on assets under management, which includes custodial and trading costs.  These costs compare very favorably to the direct competitors of which we’re aware.
Costs are more important than most individual investors realize. “A penny saved is a penny earned” is a vast understatement. When investing over decades, a percent saved is many percent earned. For example, if you save 1% per year by using a lower-cost investment, after 30 years your $100,000 investment would be $1,006,265.69 rather than about $761,225.50. (Assuming an 8% rather than a 7% net return) Over 30 years, saving 1% creates a 32.19% increase in account value.
If you know the true cost of owning your mutual fund, then I’m impressed.
Mutual funds, make knowing the true costs of your investments difficult to figure out by charging redemption fees, account fees, purchase fees, exchange fees, front end loads, back end loads, 12b-1 fees, management fees, and other expenses. They try to keep these costs confusing and hidden. Forbes magazine estimated these total 3.17% for tax-deferred retirement accounts and 4.17% for taxable accounts. 
ALPHA 3: TAXES
The more granular your control over your investments, the lower you are able to keep your taxes. The comparison between separate accounts, like those I offer, and mutual funds or ETFs clarifies the difference. If you own a mutual fund or exchange-traded fund (ETF), then you can either buy shares of the entire fund or sell shares of the entire fund. However, you cannot sell any of the many individual shares of stock within the fund. The inability to select exactly which shares to sell is a loss of control. With 4 Alpha, you own each of your shares directly, which means you can buy or sell each individual share to control and minimize your taxes. The details of tax optimization are complicated but with 4 Alpha you directly own your stocks and tax considerations are algorithmically incorporated in the trade generation process. In addition, I invest in companies for long-term gains to keep turnover and taxes low. Do you want to sacrifice control by owning funds or gain control by joining 4 Alpha?
Mutual fund investors can lose money and still owe taxes.
Mutual funds often also suffer from embedded capital gains and forced distributions that can create tax burdens even for mutual fund investors who have lost money in the fund. I understand; it doesn’t sound fair, and I agree; it isn’t, but it's true.
ALPHA 4: TRUST
In terms of both dollar impact and investor happiness, trust is likely the most critical of the 4 Alphas. Distrust, doubt, and fear cause investors to sell when the market falls, which is exactly the wrong way to invest.
From 1997 to 2016, the 20-year annualized S&P return was 7.68% but over the same period the Average Equity Fund Investor earned only 4.79%, underperformance of -2.89%. 
4 Alpha clients can see how many shares they own of each company. Investors in mutual funds and ETFs can only see that they own funds that they’ve been told own a bunch of other stuff like stocks, bonds, and even other funds that charge their own fees. Transparency increases trust and confidence.
Are your financial advisor’s and investment managers’ investments the same as yours?
Don’t you want to know? ASK!
There you have it. The four performance factors of 4 Alpha Investments.
To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or insider information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” Warren Buffet
4 Alpha Investments is designed to provide an emotional support system that facilitates adherence to the intellectual framework, especially during difficult markets.
A good financial advisor will likely provide you with
Investment recommendations that likely include stocks, fixed income, annuities, and/or alternative investments
I believe that humans’ decisions impact our outcomes and our happiness. You now have an important decision to make. You can continue investing with the same giant, expensive, impersonal institutions, and continue accepting the same disappointing results, or you can join us at 4 Alpha. Remember, Einstein’s definition, “Insanity is doing the same thing over and over again while expecting different results.” You can benefit from the prudent stock selection, low costs, tax efficiency, and trust. Getting started is easy. After opening your account, you’ll begin receiving updates on how our companies are doing, what we’re thinking, and what additional investments we’re considering. Plus, don’t be surprised if we include some links and information that we find useful, fun, or thought provoking. Don’t worry, you can easily limit the kinds of emails you receive.
Dr. William R. Nelson is an expert in asset management and the associated technology. As the Co-founder and Chief Investment Officer of EQIS for over a decade, he was instrumental in the development of technology including their proposal generation system, reporting system, and Mutual Fund Stress test. He also oversaw the due diligence of outside money managers and was the primary manager of the EQIS portfolios.
Dr. Nelson's acclaimed original research has been published in the American Economic Review, De Paul Journal of Health Care Law, The International Conference on Information Technology ITCC 2004 Proceedings, the Journal of Economic Behavior and Organization, Latin American Finance and Capital Markets, the Latin American Law and Business Report, and Public Choice, among others.
He also co-authored Mutual Funds Exposed, an Amazon Best Seller, with Dr. Kenneth A. Kim.
Dr. Nelson’s broad range of academic excellence and industry experience set him apart from most investment professionals. Few others have, like him, interned at a wirehouse, floor traded futures on the Chicago Board of Trade, earned a Ph.D. (economics from George Mason University), published in top academic journals, founded a company, designed software, performed due diligence on hundreds of money managers, simultaneously managed several dozen separately managed account strategies, and overseen over $2 billion in assets for tens of thousands of families.