Why our philosophy makes sense

A number of examples in the past week again confirm why our investment philosophy makes sense.

In Tuesday’s Wall Street Journal, a “Streetwise” column stated that “the overwhelming consensus before Christmas” was the dollar would take off, the euro would fall and emerging stock markets “needed to brace for turmoil…”

“Three months later, the dollar’s weaker, the euro is up strongly,…” and emerging stock markets are showing triple the gains of the broad US stock market.

The consensus predictions were all wrong.

We remained invested in emerging stock markets for those clients which they are appropriate and our clients have benefited. We don’t make bets on currencies, as they are too hard to predict.

Last Wednesday, the Federal Reserve increased short term interest rates by .25%. Most would have predicted or thought that the 10 year Treasury note would have risen that day. Not only did the 10 year rate decrease on Wednesday, it has continued to fall from around 2.5% to 2.398 as of Wednesday.

Predicting the direction of interest rates is very difficult. This is why we do not make bets on interest rate movements. When we purchase fixed income investments for our clients, we buy varying maturities of high quality bonds. We are investing to provide the portfolio stability, not to gamble on the direction of interest rates.

In March of 2010, when the Affordable Health Care Act, or Obamacare, was enacted, few would have recommended investing in managed health care stocks. As discussed in a New York Times column in Sunday’s business section, this conventional wisdom would have been very wrong.

“The numbers are astonishing. The Standard & Poor’s stock index returned 135.6 percent in those seven years through (last) Thursday…But the managed care stocks, as a whole, have gained nearly 300 percent including dividends…UnitedHealth, the biggest of the managed care companies, with a market capitalization that is now more than $160 billion, returned 480 percent, dividends included. An investment of $100 in the company’s stock when Obamacare was signed into law would be worth more than $580.50 today.”

We do not let political views influence our decision making. We do not generally recommend individual stock picking and this is why. Because we recommended that our clients own broad asset classes, one of which is large US company stocks, our clients benefited by owning these managed health care stocks and they reaped the rewards.

We cannot predict the future. We don’t try to. It is not a winning strategy.

We can help your long term investment performance by avoiding making bets and predictions. We will continue to invest for the long-term in a disciplined, rational and low-cost manner, which has been successful in an always uncertain future.

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