Give Thanks

As we celebrate Thanksgiving Day next week, we hope you appreciate the good fortune that so many of us have, simply by being born and able to live in the US.

Warren Buffett has often cited what he calls “winning the ovarian lottery,” which he feels Americans win the day they are born in the US. In lengthier speeches on the same topic, he cites the many aspects of your life which are determined at birth: the political and economic system you are born into, your health, gender, skin color and your level of intelligence.

While our country is certainly not perfect, we are thankful for its many virtues and the opportunities it has provided to so many of us.

We are truly thankful and optimistic, and hope you are as well.

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We are thankful for our clients, who have placed their trust in our firm. We do not take your loyalty for granted.

We are very thankful for the referrals that our clients and friends have made to people they care about, so we can assist them and better their lives.

We are thankful for clients who have requested our advice on matters in addition to  investing and financial planning, such as helping them with life transitions, estate planning, real estate transactions and other decisions or issues that are important to them.

We are thankful that our clients understand the importance of focusing on their long-term goals, and not on short-term market swings.

We are thankful for our business partners and relationships, which help us to be successful and operate our business efficiently.

We wish all of you a very Happy Thanksgiving, and hope you are able to share it with those who are most important to you.

Note: As next week is Thanksgiving, there will not be a weekly blog post email next Friday (the only week off, each of the past few years). The next email will be Friday, December 6th.

Personal Success…..Our Coach of the Year

Blog post #420

Everyone defines success differently.

Success in work, success as a financial advisor, success in life, success as a parent or as a football coach.

Each has a different criterion for accomplishments, goals and success.

My business partner, Keith Rybak, has reached a level of success and accomplishment across many of these areas that are worthy of recognition.

Within our firm, Keith is responsible for the day to day trading, financial rebalancing and working with me on strategy, as well as providing personalized advice and guidance to clients.

Outside of the firm, Keith, along with his wife Ann, are raising their “team” of 5 children, four boys and their daughter, Olivia, who range from almost 9 to 17. Each is different and unique.

On top of all of that, Keith has been coaching youth football for the past 10 years for the Walled Lake Braves football organization, of which Keith also serves as the organization’s President.

While teaching the players values, discipline and sportsmanship, his teams have had a record of 27-2 over the past three seasons. They have won 2 league “Super Bowls,” including the most recent season, in which they finished an undefeated 9-0 on their way to a Championship season. In our view, he is Coach of the Year!

The Braves after they won the “Super Bowl” this season, 22-0, at Wayne State University’s stadium, capping off a 9-0 season. Coach Rybak is in the back row, upper left

Keith feels his football coaching success, similar to progress WWM has made with our clients, is based on preparation and focusing on the long term. Keith has worked with the same set of coaches during much of the past 10 years. WWM has had very little staff turnover, as we have had only one person leave our firm since 2009, who wanted to change careers.

Preparation has been a vital aspect of their football game plan. Keith feels that no other coaching staff was more prepared than his staff. He sees a similarity between coaching, which requires practice and a game plan, and the individual investment plan that we develop for each of our clients, which we call an Investment Policy Statement (IPS).

His coaching staff develops a philosophy each year. For 2019, that philosophy was to build a fearless culture, so that behind every fearless player is a fearless group of coaches, who love and care about their players so much that they refuse to let them be anything less than their best.

I have seen the time, dedication and care that Keith puts into his coaching, and I’m sure that he and his coaching staff strive to help their players, 7th and 8th graders this year, be their best and develop as strong teammates.

Just as we as financial advisors need to adapt to changing financial markets and life events, Keith’s teams would have to evaluate many factors before and during a game, and be able to react, adapt and calmly make quick and decisive decisions.

They would identify their strengths and weaknesses to formulate a game plan. Before and during each game, they would assess their risk. Based on their players and the opponent, should they run or pass more? In his league, passing was more risky than running. How strong was their defense? Did they need to score 4 touchdowns or only 2?

How much risk did they need to take? This is the same question we often discuss with you, our clients, as we evaluate and provide you with financial and investment guidance. How much exposure to stocks do you really need? Do you have the patience to hold small value stocks, during periods when they may underperform other asset classes, for the expected longer term reward?

Keith and his coaches worked with their players from mid-summer through late October. They teach them plays. Emphasize conditioning. Develop teamwork.  They started every practice by chanting “Win Today.”  This was a simple and powerful message, that is applicable to all aspects of life. Their team motto stresses that no other team will out work them, no team will out smart them, they will have better practices, better teammates and “most importantly, no team will have more fun than us.”

An example of the fun that Keith brought to his team, and the league, was helping to organize a special day playing at Michigan Stadium earlier this fall. Various age groups of the organization played all day, while their families and friends got to share in the excitement and photo opportunities. As you can see below, Keith and his son, Austin, had a triumphant day at Michigan Stadium, winning 37-0.

The coaches developed game plans, and based on their record, they clearly executed it very well. At the same time, just as in investing, Keith knew that every play in a game does not work out like they designed it or practiced it. Sometimes things don’t work out as planned.

Keith knew they had the right strategy, but that the outcome would often be different. It still made the strategy correct. Similarly, we are confident that having a globally diversified stock portfolio is the proper long term strategy for most of our clients. Even though International stocks have underperformed US stocks for a period of years, we still feel that having a globally diversified portfolio is the proper long term strategy. Sometimes you can have the right strategy, it just doesn’t work out every play, or every year.

We are quite proud of the effort and results that Keith has had as a football coach for these young athletes. We are confident that they will be better in life, as well as in future athletics, as a result of Keith being their coach.

We are also confident that Keith’s same dedication to planning, strategy, patience and effort will benefit you as a client of our firm.

And just so you don’t have to worry, Keith is not planning to leave his day job as a financial advisor for a football coaching career.

If you want to talk to a winner, on the field and off, give Keith a call.

Importance of Staying in the Game

Blog post #419

Markets go up. Markets go down.

It can sometimes be difficult to stay invested, especially during down periods.

As the chart below clearly shows, staying invested and not trying to time the stock market is one of the most valuable pieces of financial advice that we can provide to you.

The data below is based on the S&P 500, which is an index of very large US based companies. The companies in this index are always changing, as companies get bought, merge, shrink and grow.

From 1970 through August 31, 2019, $1,000 invested in the S&P 500 grew to $138,908.

However, note the significant change in that outcome if you miss some of the top performing days.

If you were out of the market on the top 5 performing days of the S&P, your return would have declined by almost $49,000, from $138,900 to $90,170.

If you missed the best 25 days, the outcome dropped from $138,900 to less than $33,000, an incredible loss of over $106,000, from only 25 days over almost 50 years!

There are no proven ways to time the market. So market history and academic data says the best course of action is to adhere to your long term financial plan, which we develop with you, and stick with your stock allocation through up and down financial markets.

Sticking with your financial plan, and investing in stocks, will provide you with the best opportunity to reap the rewards that stocks can offer over the long term.

While we provide this data on large US based companies as an illustrative example to guide you not to try to jump in and out of the market, it is important to emphasize that we strongly recommend a globally diversified stock portfolio, with many asset classes, both in the US and Internationally, not just using the S&P 500.

While the S&P 500 has outperformed many other stock asset classes recently, this has not always been the case. There have been other long periods, such as most of the period 2001-2010, when other asset classes, such as US small value and most international and emerging markets far outperformed the US Large asset class, as represented by the S&P 500.

Do not try to time stock markets. That is not a winning game.

Over the long term, do not invest only in the S&P 500. That is not a winning game.

Over the long term, to have the best chance to reach your financial goals, you should be globally diversified across many asset classes, tailored to your individual and family’s need, ability and willingness to take risk, as well as your age and time perspective.

We look forward to talking with you to develop, or review, your portfolio.

Source:

“What Happens When You Fail at Market Timing”, Dimensional Fund Advisors,10/29/2019