Redefining Portfolio Efficiency Efficiency is achieving maximum productivity with the least amount of effort or cost. Headwater's belief is that investments should perform efficiently as well. Our process seeks to identify investments that produce the greatest return for the least risk taken. Efficiency was introduced to investment management in 1952 by a concept called modern portfolio theory or MPT. MPT’s output measures efficiency in aggregate without regard to the efficiency of individual holdings. Hardly modern now, it turned 65 in 2017 and, if human, would be eligible for Medicare and social security. "Rather than create an efficient portfolio - create a portfolio of behaviorally-efficient investments" Our methodology shifts the thought of portfolio construction from an aggregately efficient portfolio to one with behaviorally-efficient investments. The risk/reward profile of an investment is dynamic and, over short periods of time, infrequently behaves like its longer-term averages. Investments endure periods when their price action behaves and misbehaves. Just as a Facebook photo may portray a beautiful, smiling, happy family; it can obscure the hair-pulling, name-calling, and screaming it took to get everyone to smile at the same time. So, the picture you see is not necessarily the true picture of what happened behind the scenes. Our process seeks to sort out the price action to identify which investments are behaving in an efficient manner Past performance does not indicate future results. Asset allocation strategies cannot eliminate the risk of investment loss.