If you are paying any attention to the media the last few weeks you know at least two things: China and the United States are having a tariff standoff, and the market (AKA all things tradeable) is having a rough end to the summer. On the latter point, why does volatility to the downside drive so much hysteria and so many prime time CNBC specials? I believe it is simply because we are all human.
(750 words and approximate reading time 3.5 minutes)
Which is more important?
How many times have you stopped and considered the real meaning of words used every day? More importantly, how often do you challenge your own notion of that meaning by looking it up? Recently, I heard a friend and father I respect tell his son that discipline is more important than motivation. He said, “Motivation can come and go, but discipline will take you where you must go, even when you are not feeling very motivated”. It was compelling enough to write down, and consider not only the meaning of the words but also the implications. It is great advice, and I thought I would share what I found. Read on.
Approximate Reading time: Three minutes and 30 seconds
Recently I was listening to an excellent podcast (link here) in which Michael Kitces was interviewing Manisha Thakor (founder of Money Zen) about building your own media brand in an authentic way. Yes, that is a buzzword-filled subject, but I was curious. For at least the first 30 minutes or so, they talked at length about being introverts, surprising given that they make their living speaking in front of people and both have huge relationship networks. This conversation spoke to me, as I am an introvert, so I thought I would share a few observations and recommend some followup reading. Enjoy.
Topics: Advisor Practice Management
“The three greatest risk to investors: Behavior biases; loss of compounding from large portfolio losses; and the opportunity cost of being too conservative.”
- Jon Robinson, Systematic Investing And The Rise Of Emotional Intelligence -
As most know, investors notoriously underperform the market by aggressively buying at the highs and selling at the lows. In fact, a DALBAR study released this week shows the average equity fund investor experienced twice the loss of the S&P in 2018. However, it is possible to conquer this reactive fear and respond effectively to the inevitable presence of market volatility.
Topics: Behavioral Finance
As anyone who has read Blueprint insights over the last few years knows, we believe in two types of diversification. First, asset diversification is a keystone of investing and we embrace the benefits. Second, we add time diversification using trend following techniques to mitigate the vagaries and cycles of markets. Why? Because, historically, when given enough time (say 20 years), asset diversification (buy and hold) has been almost unbeatable. However, humans do not naturally invest or even think that long term and struggle with staying the course when the market inevitably course corrects either in a short-lived correction or sustained drawdown. This in turn reduces the probability of achieving their long-term financial objectives. Please allow me to elaborate.
Topics: Systematic Investing