October made up for August and September
August was a bad month for stocks, worldwide. The negative headlines were everywhere.
September was again a bad month for stocks, both in the US and internationally.
When it was least expected, October turned out to be a great month for most stocks indexes, throughout the US and elsewhere. October’s major indexes gains offset the losses of August and September.
The lesson: No one can predict when markets will increase or decrease. By staying invested during the ups and downs, you will benefit over the long term by the positive returns which stocks have provided.
Investing in the New Economy
One of the benefits of our investment approach is that by owning a globally diversified portfolio, with exposure to so many companies and industries, you do not have to try to pick the next hot companies. You already own them and benefit from their growth.
Ten years ago, I don’t think many people would have accurately predicted that each of the following technology related companies would be among the 10 largest US companies by stock market value:
- Google (now legally named Alphabet)
What is the Right Alternative?
The Wall Street Journal has been full of stories and headlines in recent weeks of hedge funds that have vastly underperformed the general markets in the past few months. Alternative investments, like hedge funds, which try to “outperform the market” or provide downside protection with their “stock picking ability, ” have rarely been able to consistently meet these objectives over the long term or with consistency.
Numerous hedge funds are closing, due to their underperformance and investor discontent. While the markets may be flat or slightly up for the year, that is much better than the double digits losses many hedge funds are reporting, due to bets they have made on certain companies or sectors, such as energy, commodities or health care.
This example is another way to provide you with confidence in our investment approach of broad global diversification with very low costs. These hedge funds appeal to large institutions and very wealthy individuals, but come with huge fees (sometimes 2% annually plus 20% of their profits), high turnover and volatile performance. We know that the slow and steady performance of our investment philosophy will provide you with the best long term investment experience, while diversifying and minimizing your risks. These factors will enable you and your family to meet your long term goals.
For many reasons, we do not think these types of alternative investments make sense for almost all investors. The “right alternative” is implementing and sticking to the core investment philosophies which we have discussed in these essays and adhere to on behalf to our clients.