For starters, it’s been a while since my last post as I had some minor “fix me up” shoulder surgery a few weeks back. The mobility limitation has kept my computer time to a minimum and reserved almost solely for client needs. I’m happy to report however, all is healing nicely and I should have a normal shoulder in a few months. While it was a tough decision to make (having the surgery), it was an easy one as it’s little league season, and one thing I truly love is playing ball with my boys. The shoulder was preventing me from enjoying it – so it will be well worth it when all is said and done!
Which brings me to the purpose of my post. In 15 years as a financial advisor, and 5 years owning and serving client needs through my own registered investment advisor firm Red Rock Wealth Management, I’ve never seen or heard so many varying views on where we go from here in the markets.
Typically, the majority of clients and prospective clients will feel somewhat strongly one way or the other – either doom and gloom or irrational exuberance (as Bernanke’s predecessor Greenspan liked to call it!). It’s unusual this go around however. It’s a very mixed, almost confused bag of bull vs. bear sentiment.
In my Q1 and Q2 financial planning and investment reviews I’ve found that just like the talking heads on CNBC, NO ONE KNOWS! For every client that’s a bull, there’s a prospective client that’s a bear and a few scattered in between. Everyone has a guess, or a gut feel, but are you willing to bank on it?
As I’ve said consistently throughout every related post – there is NO telling where the markets go in the short term. Trying to outguess the markets is what I consider to be a fool’s game with no good possible outcomes other than statistical luck!
What I do feel confident in saying is the planning, combined with a low-cost low-turnover properly diversified, passively managed and consistently re-balanced portfolio is the only path to consistency in financial planning over long periods of time. In every study I’ve done over the years, the re-balancing procedures add value by reducing portfolio volatility and increasing returns through a forced program of selling outperforming assets little by little and buying under-performing assets little by little. Isn’t it great to know that your planning forces you to consistently buy low and sell high over long periods of time?
So, now may be the time to put the blinders on. The markets have had an AMAZING, in fact nothing short of STELLAR run for over a year now without so much as a reasonably noticeable pullback. Markets don’t go straight up, and don’t go straight down. We’ll see pullbacks, and it will provide opportunities to re-balance.
So if the 200 pt. market drops make you nervous, remember – YOU DON’T OWN the Dow Jones, or the S&P. You own (or should own if you’re not a Red Rock client) a broadly diversified portfolio of highly non-correlative assets (for example gold is up today while equities are down). You also own bonds to provide a measure of conservative investing and income generation in your portfolio.
So if it’s nerve wracking to watch, put the blinders on and remember your plan is well constructed for long term success – not short term speculation! If your concerns are relative to a change in your financial situation – give me a call and we’ll schedule a meeting to discuss and review any adjustments which need to be made.
