Investing For Growth and Protection

In advising you on your investing, you know that we pay close attention to both growth and protection in helping you achieve your goals and match your preferences. Of course, you also know that proper diversification is an important part of our advice to you. Diversification is key to protection planning during down markets and can also help you achieve the long-term investment returns that support your goals.

If you are a stock market watcher, you also know that much of the U.S. stock market, after experiencing volatility for a good part of the year, has recently been rising significantly, shrugging off the challenges of the tariff discussions. But, what is generally less known is that several other key investment areas have recently been posting opposite, i.e., negative results. Examples include many international stocks and U.S. bonds, which have declined due in large part to the tariff discussion and interest rate increases, respectively. Of course, diversified portfolios may contain all three of these investment categories, i.e., U.S. stocks, international stocks, and bonds. All three of these categories are important to protection planning – especially with likely stock market corrections and a bear market looming out there at some point – and to achieving the long-term growth that supports your goals.

But, it is not always easy to be a diversified investor, especially during times when our portfolio results differ substantially from what we see on the news.

Mark Carlton, CFA, of Trademark Financial, an analyst we highly respect, explains the current environment for diversified investors and investment managers this way:

“It has been a difficult environment for [investors and] asset managers who are philosophically committed to diversification. With domestic stocks ahead around 10% (all figures YTD through September 16th), any money allocated to foreign stocks (-4%), domestic bonds (-1.5%) or foreign bonds (-3%) is negatively impacting … returns relative to the U.S. domestic market which is most people’s market performance reference point. For example, a 60/40 portfolio invested 40/20/30/10 (domestic stock, foreign stock, domestic bonds, foreign bonds, respectfully) has returned 2.45%. . . Some might respond to this by saying that they don’t care about diversification – ‘just give me the best return, I don’t care where it comes from’. . . [However] it has been pointed out several times over the past few years (by myself and others) that valuations for most U.S. stocks are stretched; at some point that rubber band is going to snap . . .”

Over the coming days, we will be reporting your investment results to you, both recent and since the start of our work together, along with more detail on the performance of the investment categories included in your portfolio and why we continue to recommend them to you. We will continue, as always, to focus on your goals and preferences, and the investment strategies that we believe are likely to be most helpful to you, given your particular needs for growth and protection.

If you have any questions along the way, please just let us know. As always, we enjoy hearing from you.