Timeless Advice

In June 2011, I wrote a blog post that was advice to myself as a financial advisor, based on the prompt: What would you say to the person you were 5 years ago? What will you say to the person you’ll be in five years?

This post is a variation of those questions, written to you, as our clients and other investors.

What investment advice should you know that will be applicable and helpful to you today, in 5 years, 10 years and many years into the future….

  • You should rely on a financial advisor and firm that only have your best interest in mind when providing any advice or recommendations. This means they must meet a fiduciary standard. Large brokerage firms and banks generally do not meet this standard. You should ask and understand the real difference.
  • Have a well diversified portfolio, based on your personal need, ability and willingness to take risk.
  • Your portfolio of stocks should be globally diversified, which means there should be allocations 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 active mutual funds and money managers do not beat their respective benchmarks. Thus, using low cost mutual funds with a buy and hold strategy is the best way to be rewarded by the stock market over the long term.
  • Your investment goal should not be to beat the S&P 500 every year. You should be focused on making progress towards your long term financial goals. While a globally diversified portfolio should outperform the S&P 500 over the long term, it should make your portfolio less volatile….a smoother and better investment experience.
  • Do not take risk with bonds or fixed income investments. 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. Be prepared for down markets, which are the norm and not unexpected. Be prepared emotionally for down markets, as they occur regularly. Since 1945, the S&P 500 has declined 27 times between 10-20%. That is a significant decline about once in every 3 years. Sometimes the declines are far worse. However, the market has always come back and made new highs. Talk to your advisor about bad markets as well as good markets.
  • Do your best to remain disciplined, during down and up markets. If you do this during a down market, you will be well rewarded when the market rebounds. If you are disciplined during up markets, you may avoid fads and some excesses.
  • Be fearful when you are greedy, and be greedy when you are fearful.*
  • If you bought stocks during the last financial crisis (2007-09) or allowed us to do so on your behalf, you added rocket fuel to your financial future.*
  • Know that 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 when to buy back into the market.
  • Rebalancing is crucial to your long term success. When an asset class does well, allow your advisor to sell some of it. Your advisor will use that money to buy another stock asset class that has not done as well, which leads to buying low and selling high. Or the advisor may use the money to add to your fixed income allocation, which is your long term safety net.
  • Plan with your financial advisor and have a simple written document which includes the firm’s investment philosophy and your personal allocation plan. It may be called an “Investment Policy Statement.” This will help you achieve a greater sense of financial comfort and security. Do not work with a firm that does not use this kind of written plan.
  • Be patient. Save early. Focus on the long term.  Avoid fads and what is “hot” today. Accept that the future is uncertain. Do not trust others that “predict” the future.
  • Do not get caught up in products and alternative investments that are hard to understand. Sometimes simple may be better, almost always far cheaper and often more successful.
  • Use a financial advisor that encourages your questions on a variety of financially related topics, listens to you and explains things to you with clarity, so you can understand them.



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*These concepts are similar to those written by Jason Zweig, an excellent financial journalist, in a blog post he wrote on May 20, 2018.

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