Broker Check

May Newsletter

May 3, 2019

"You Need A Better Long-Term Strategy ……”

By reading our newsletters, you know we emphasize evaluating results over long periods of time.  Our portfolio strategy is not based on short-term trends or “hot picks”! In this month’s newsletter I will review traits and characteristics of successful investors which have been compiled from research on successful investing outcomes.

Develop a long-term plan and stick with it.  Many tall-tales have been told about the lucky investor who hit it big with a stock idea which may boil down to nothing more than exaggerated entertainment.  Trying to make quick money is a dangerous path fraught with very high risk which most often ends in failure. For most of us, investing is not about getting rich quick or even making as much money as possible; it is about reaching goals over time.  Primarily, we work with clients who share the goal of a financially secure retirement.  Other common goals of many of our clients include college education funding and plans for a future endeavor.

Warren Buffett believes the most important investor trait is the ability to be patient.  This trait contributes to eventual long-term gains.  Many investors create losses by acting on their emotions.  The most difficult emotions to overcome are fear and greed.  You need to be patient so you can resist those temptations to achieve success.  Maintaining patience allows you to reduce mistakes that you may make along your journey as an investor.  Avoiding emotional decisions is one of the main reasons that clients come to us for objective management of their portfolios.

Successful investors have developed a well-defined investing strategy that works over the long-haul and they stick to the strategy. Intelligent Investment Management’s strategy is rooted in having a well-diversified global portfolio that looks at risk, how to defend against it, reduce it and proceed knowing that any successful long-term strategy must account for various threats or risks to your portfolio.

The path to accumulating wealth and experiencing success as an investor is full of challenges, hard work and sacrifice.  To get through these challenges, like all challenging times in life, you need to be determined.  This means you must be willing to push yourself to stay the course even during uncertain times.  You must have confidence and display discipline along the way to reach your financial goals while assessing the progress of your goals periodically.  As independent investment advisors, having confidence and discipline has been the cornerstone of our success.

It has been said that as many as 10,000 ads pass in front of us each day. How can anyone survive unless they are able to ignore some of this commotion? Tune out the noise.  When you turn on the nightly news, you are hit with a deluge of opinions that are often misleading at best.  The more you filter out the mixed messages and contrarian opinions the better your ability to stay the course in order to meet your long-term goals and objectives.  The key is to believe in a long-term strategy with time-tested outcomes.

When everyone around you was sure the sky is falling (think 2008), and investors were frantically selling as they bailed from the stock market, the investors who remained calm won. Stay calm in the storm knowing you have a reliable strategy and a trusted “Captain of the ship”. Only those who sold during the last recession lost money.  Our investment portfolio fully recovered the unrealized paper losses within three years from the December 31, 2007 yearend closing value, while US equity markets took a full five-years to recover from that point!

When the value of your portfolio falls significantly, it is only human nature to want to run for shelter due to the human aversion to loss we all share; unless you are highly confident in your strategy.  There is an emotional pull to stop putting money towards your future when the market is not working (temporarily) in your favor.  However, the best investors understand their time horizon, ability to weather temporary storms and have the capacity to tolerate the market ups and downs.  During turbulent times they maintain confidence in their asset allocation of stocks because they have developed a well-defined investing strategy that they can live with in good and bad markets.

Dealing with the ups and downs of the market can be stressful, but research from the American Psychological Association has shown that the more optimistic your outlook, the easier it is to ride the waves.  Successful investors stay optimistic. Thriving investors do not allow themselves to sweat it when the going gets tough; they choose to focus on the positives instead. Successful investors know that there are always two sides to an investment. They know that the future is unpredictable, so they prepare for it in advance.  Average investors try to predict the future of their investments; they count their chickens before they are hatched. Successful investors do the opposite; they prepare for the best while still preparing for the worst and know those moments are only temporary.

In his book, The Millionaire Next Door, Thomas J. Stanley outlined the key habits of savvy investors by saying, “They save aggressively, spend conservatively, and don't buy things they can't afford”.  Adopting those same tried and true principles in your personal life can go a long way towards putting you in the driver’s seat leading up to and during retirement. After all, it is hard to build serious wealth when you're bogged down by credit card debt or are constantly behind on the rent. Practice good habits in every area of your finances.  We regularly counsel clients and families on how to achieve their long-term goals.  If you are interested in reading Stanley’s book, please contact Laura and she will send you a copy.

In summary, clients who enjoy their favorable investing experiences exhibit an understanding of market history and what is realistically achievable.  They know that returns are not predictable, but generally revert to long-term averages if they have patience and a long-term perspective.  All successful investors have a clear focus on their specific time horizon which should be their relevant benchmark.  What happened last week, last quarter or even last year is of little concern; more relevant is what has happened in the last ten years, or what will happen in the next fifteen or twenty years if they stay the course. Successful investors fully expect market volatility and understand that volatility or risk is necessary in order to experience the gains the market will yield over time.  Without risk, investment returns cannot outpace inflation. Above all else, successful investors have a willingness not only to listen and learn, but also to act on good advice.  Our aim is to communicate helpful advice in the right way, so that it will be acted upon, creating long-term benefit and the achievement of your own personal goals.

As your investment advisors, we have created a portfolio strategy that has been successful over time and which is built to help clients throughout their lifetimes. It is important for each client to have a good foundation of these important traits to be a successful investor. As always, please contact either Steve or me if you have any questions.  We hope that you and your families enjoy the beautiful Spring weather and take every opportunity to get outside and smell the roses!


Intelligent Investment Management, LLP