Standing the Test of Time

We do not give advice just for today. Our advice must be successful over many years.

Over five years ago, in June, 2011, I wrote the following essay, in response to a prompt to provide advice to myself that I should give for the next five years.

I still think all of the following is just as applicable today as when I wrote this 5 1/2 years ago.

In June 2011: What advice would I give now, to myself, for 2016?

Provide financial advice to your clients that is always in their best interest.

Be sure that your clients have well diversified portfolios, based on their personal need, ability and willingness to take risk.

A portfolio of stocks should be globally diversified, which means that there should be a significant allocation to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.

Remember that over time, the vast majority of mutual funds and money managers do not beat their benchmarks.

Do not take risk with bonds. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.

Expect the unexpected, and plan for it. Talk to your clients about bad markets as well as good markets.

Assist your clients in remaining disciplined, especially during down markets. If they do this, they will be well rewarded, after a market downturn, when the market rebounds.

It is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and then again (when to buy back into the market).

Rebalancing is crucial to long term success. When an asset class does well, sell some of it. Use the money to buy an asset class that has not done as well. This leads to buying low and selling high.

Plan with your clients (and have a simple written document), so your clients can achieve a sense of financial comfort and security.

Buy individual bonds or CDs of very high quality, only, which will work well if interest rates rise or fall. Bond mutual funds will not do well if interest rates rise.

Conclusion, today: We have utilized a rational and consistent investment philosophy since we formed our firm in 2003. What I wrote above in 2011 is still valid and applicable today, despite the constantly changing financial markets and the ups and downs the markets have experienced.

It should provide you comfort and confidence that our advice does stand up to the test of time.

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