I have a secret for you. Are you ready? I hate monthly investment account statements! Why? They get people all worked up and change our focus from long term (where we should be focused) to short term (where our emotions will mess us up). We all know that the stock market fluctuates day by day (some days more than others!), but tends to produce very nice results over the long run. So, why are we measuring results monthly? If we got a monthly statement showing the value of our home, a lot more of us would be renting! Each day, we have meetings with clients who, quite understandably, worry about their investment portfolios. But, with a diversified portfolio of high-quality companies, we don’t need to drive ourselves crazy. The best thing we can do is ignore the noise until our next meeting. It’s not that we don’t want you to call us! We genuinely like and care about each and every one of our clients and we’re always happy to talk. It’s because we care about you that we want you to be happy – not worried.
As the past Chair of Yale University’s Investment Committee Charles Ellis writes, “The biggest challenge in the stock market…is neither visible nor measurable; it is hidden in the emotional incapacities of each of us as investors. Investing, like parenting teenagers, benefits from calm, patient persistence; a long-term perspective; and constancy to purpose. The biggest risk in investing is almost always the short term behavior of the investor…The hardest work in investing is not intellectual; it’s emotional...particularly with Mr. Market always trying to trick you into making changes.” -Winning The Loser’s Game, Timeless Strategies for Successful Investing, 7th Edition, p. 43
The economy is strong. Recent corporate profits largely met or exceeded expectations, but many companies expressed lower future expectations due to rising interest rates and increasing costs. The housing and auto markets, and the growth in the economy as a whole, appear to be slowing. Stock prices are forward looking, and the future is not predictable. There is no such thing as a “foreseeable future.” No one knows whether stocks will continue to slide or bounce right back. I remember all too well how in March of 2000, after a long run in growth stocks in the 1990’s, stocks began to slip and that downward trend continued (exacerbated by the horrors of 9/11/01), month by month, for three years. Earlier this year we saw markets dip and then bounce right back. As with most things in life, we naturally believe that, in investing, we’ll do better when we try harder – but that’s simply not the case. What we do know is that we have designed your investment portfolios carefully with your goals and tolerance for risk at the forefront of our minds. For investors with an appropriately diversified portfolio - it is only by ignoring these gyrations and sticking with the long-term plan that things play out over time and we see the returns we expect and achieve our financial goals. Rest assured – our goal is to be prepared for the unpredictability of the market.