Category: Uncategorized

We are generally in the pursuit of more. More income, more recognition, more opportunities, more happiness etc. Because “more” often results in desirable outcomes, it is natural to think in terms of what we can get or do more of, rather than what we can do less of. But when it comes to investing, focusing on what we do less can yield us more return.

The Power of Doing Less

When it comes to investing, it isn’t about becoming more intelligent. It is about making fewer mistakes. It is about evaluating the performance of our holdings less often. It is less listening to the noise of forecasts and the financial media. It is becoming less impatient and less interested in the returns of others.

Fear of loss and fear of missing out are powerful emotions that can influence the best of us to make unwise decisions. Feelings are automatic and inherent in most of us, and we are hardwired to respond to those feelings. The less “tuning in” we do as investors, the less likely we are to be influenced to make hasty decisions.

Mistakes Happen

Every investor, even the very best of them, make mistakes. What separates the best investors from everyone else is that they have learned to make less mistakes. It’s not that they were born making fewer mistakes, it’s that they have chosen to recognize and learn from prior mistakes. It is more natural to ignore our mistakes or blame another (i.e. the stock market). But if we don’t admit and learn from our mistakes, we are bound to make more of them, not less of them.

Lessening Mistakes

We are hardwired to subconsciously rely on mental shortcuts and emotions when making decisions. This inevitably leads to mistakes. We can lessen our mistakes by creating a decision framework, a process. Setting up proper defenses and procedures can help us respond less emotionally and more purposefully to market and economic occurrences. And that is why you have me! I am here to help you make less mistakes and more decisions that are in line with your stated goals and objectives.

– Scott

As New Year’s Day is now in the rearview mirror, we can surmise that people are struggling to keep their resolutions. Indeed some may have already given up, perhaps with a determination that next year will be the year. A long-term study by the University of Scranton found that less than 10% of resolutions become part of our lives.¹

Such a high failure rate at resolutions of our own making should give us pause. Why are we so bad at keeping resolutions? Research shows that it may come down to two primary things: how we frame our resolution² and taking too big of a leap – too big of a behavior change at once.

Framing Your Resolution for Success

Framing the resolution comes down to our actions. Many resolutions are to stop a bad habit. Stop smoking, stop eating sweets, stop using social media. Those are incredibly difficult to stop because of triggers (conscious and unconscious) that provoke a response. It is more productive to create a new habit in its place, so there is a response, just not the bad habit. For example, instead of smoking, perhaps you chew gum. Instead of looking at social media, you pick up a book. You select a positive habit to replace the bad habit.

Creating Habits That Stick

Resolutions can be aspirational, but we should be realistic and recognize we may need to create small habits that inch us in the direction of our resolution. To improve the likelihood of sticking with new habits, we should form ones that are not major deviations from our current lifestyle. Making a 1% change may not be noticeable or something to brag about, but they can be far more meaningful in the long run.

Once we master a new habit, we create another small habit that gets us one step closer to our resolution. This becomes a continues cycle of improvement that empowers and helps us become the person we want. A marathon is completed with many small steps, not a few giant leaps. We should view our personal resolutions in a similar manner.

Today is the Best Day to Start

No matter what, today is the best day to start a habit that will improve your life. Why today? Because it isn’t tomorrow. When we are forming small habits, we don’t face uncomfortable or unnatural changes to our lifestyle. Hence, there is no reason to procrastinate the day of achieving our resolutions.

– Scott

1. Just 8% of People Achieve Their New Year’s Resolutions. Here’s How They Did It, Forbes, Jan 1, 2013.
2. The Science Behind New Year’s Resolutions That Actually Stick, WSJ, Jan 27, 2023.

Most investors love economic and market forecasts. With the markets so uncertain and volatile, our brain craves some sort of idea of what the future holds. But the markets are unpredictable – evidenced by the fact that no one can consistently predict them with accuracy. Of course, a certain forecast will be right from time to time, just like a broke­­n clock. But market forecasts are not reliable, no matter what your brain tells you.

Unlike market and economic forecasts, my forecast is reliable and robust because it is based on enduring investment truths and investor behavior. These factors are more dependable than market outcomes and more important to an investor’s well-being.

My Forecast For 2023

In full disclosure, the following forecast is nearly identical to my forecast from last year and years prior to that.

• The economy/market will do something that surprises us (and the experts). In hindsight we will wonder how we didn’t see it
• The financial media will emotionalize headlines and short-term market moves to entice you to tune in – so they can achieve better ratings
• Investors who watch the news and stock market often will experience more stress than those that don’t
• Investors that move to cash, waiting for a “better time,” will suffer significant uncertainty and anxiety about when and how to get back in
• Your investment decisions and reactions to market events will ­­have a significant impact on your personal investment return
• You will be tempted to change your investment strategy based on market performance, expert forecasts, and/or your personal beliefs about the future

Conviction, patience, and discipline are virtues every investor should develop. They aren’t easy, yet they are essential for your success. As your advisor, one of my most important roles is helping you ignore the noise and focus on what really matters to your financial success.

I wish you a prosperous, fulfilling, and happy 2023. Thank you for allowing me to be your trusted partner along the journey.

– Scott

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.

It’s that time of year. It’s the time that every analyst, economist, and strategist will declare their forecasts for 2023. These forecasts come from well-educated, intelligent individuals – with many years of experience. Some of the forecasts will be made with much confidence. No matter. You shouldn’t heed them.

Folly of Forecasts

Historically, the accuracy of financial expert predictions is less than 50%.¹ Why is that? It’s not that the experts aren’t intelligent or have bad information. It’s because the markets and economies are unpredictable. They always have been. The proof lies in the fact that no one has ever been able to consistently predict future market or economic outcomes.

Last month two highly experienced, well-known, and respected economists provided forecasts along with compelling evidence and arguments to support their forecast. Want to know what they said? The complete opposite of each other! One predicted market fragility and more frequent and violent economic shocks.² The other said the inflation surge is over and expects the market to rally in December and continue into next year.³ Contradictory financial forecasts are commonplace because no one knows exactly how things will play out, despite relying on the same information.

Appeasing Uncertainty

Even when we understand that markets are unpredictable, we still want to read what the experts have to say. This is because our brain, while consisting of a lot of gray matter, hates gray areas. Not knowing can sometimes be worse than receiving bad news because the brain doesn’t know what decision to make today for a better future tomorrow.

Uncertainty is an inherent element of the markets. Rather than pretend some financial guru knows what will happen, it is best to understand the limits of our knowledge – and that of others. We should spend our time and attention on those things that are knowable (investment truths) and investment situations we control.

Having a durable investment strategy is essential. When we have a good plan we don’t need to worry about what will happen in the short term. We can allow our plan to guide our thoughts, perceptions, and actions. Do we invest based on the market movement, headline, or prediction of the day? Or do we invest according to a plan that follows enduring investment principles and is customized to our personal situation? I recommend the latter.

– Scott

1. CXO Advisory. Guru Grades
2. https://markets.businessinsider.com/news/currencies/top-economist-mohamed-el-erian-recession-global-economy-federal-reserve-2022-11
3. https://www.cnbc.com/2022/11/21/stocks-could-rally-as-much-as-20percent-in-2023-whartons-jeremy-siegel-says.html

Tis the season of gratitude. Thanksgiving is perhaps one of the most underappreciated holidays, but most needed. Given the difficult markets we have endured this year, being thankful may not come so easy. It may be necessary to practice intentional gratitude.  

There are so many things beyond our individual control – the vitriol in the media, strong political opinions, and the financial markets to name a few. These will continue with us, and if we aren’t careful could consume our thoughts, feelings, and our personal degree of contentment.

One way to create happiness, despite whatever circumstances we are in, is to practice gratitude. We may not be able to control our circumstances, but we control whether we choose to be grateful. We should be thankful for much; in fact, we probably don’t spend enough time counting our blessings. And that is life. While we do our best to be thankful, it is often short-lived.

Choosing to See the Good

With every decision, every life event, it is our choice to see the good in it. Even bad outcomes and decisions can be significant positives if we learn from them and become a better person. But we must choose that.

There are people who are thankful for the smallest things – you probably know a few. They are like magnets. We want to be around them because they exude love and joy. And then there those who are impossible to please, those we can’t wait to get away from. Who do you want to be this holiday season? Like it or not, we tend to take on traits of those we surround ourselves with. Want to be more grateful? Spend more time with people who practice gratitude regularly.

Thank You

I am grateful for you. Thank you for your trust and confidence in me. Thank you for the privilege to know and work with you. Thank you for taking my advice, even when it goes against what may feel right. Thank you for being a patient investor, I know it’s not always easy, especially this year. And thank you for choosing me as your partner on this journey.   

– Scott

Last year we were told that inflation was transitory. This year we learn that it is more persistent. And now investors have entered a bear market. Investors may be wondering how transitory or persistent this bear market may be. I wish we knew, but those kinds of things are only known after the fact. But recalling historical events can help us put today’s circumstances in correct perspective.

Big Historical Events Were Transitory

The Great Depression was transitory. So was the Civil War and every war mankind has engaged in. The Great Financial Crisis was transitory. Basically, anything that happens in life, no matter how long it lasts, is transitory so long as it has an end…eventually.

The definition of transitory is “of brief duration, not persistent.” But therein lies the ambiguity. How long is brief? How we define “brief” is subjective. It is based on the individual, the time horizon, and the activity undertaken. Is 30 minutes brief? Not if you are holding your breath. What if you are an investor? 30 minutes shouldn’t even register.

Transitory Events Can Cause Permanent Damage

We may amuse ourselves debating how transitory the bear market will be, but what really matters is that a bear market can cause great damage regardless of how transitory it is.

Millions have died in “transitory” wars. Many people suffer throughout their lives due some “transitory” abuse they experienced. Many investors had to significantly adjust their lifestyle from the transitory Great Financial Crisis because they sold during a transitory bear market and made their loss permanent.

Historically, the markets have never not recovered from a significant downturn. The adage, “this too shall pass” is embraced by some of the most successful investors. Investors that construct an investment portfolio in line with their situation, needs, goals, and risk preference may be able to better withstand the transitory bear markets.

How Do You Define Transitory?

Most investors have a long-term strategy and plan. But we may still be influenced to make financial decisions based on transitory headlines and market movements. One of the best things you can do during a difficult time in the market is ask yourself: Is this situation transitory? You will find that crises, while they may last a while, tend to be transitory as businesses and consumers adapt and adjust. Such perspective will help you stay the course during this bear market, and even be able to take advantage of others’ shortsightedness.

– Scott

A favorite (and costly) pastime of investors is to invest in assets that have recently done well. This happens in good times as investors seek better returns, and they happen in bad times as low-yielding investments such as cash are more attractive than money-losing stocks. In other words, investors chase returns.

By investing in what just did well, investors are systematically buying after they witness gains elsewhere and selling after their assets experience loss. Chasing returns can feel very good at the time but comes with a real financial cost. Dalbar, Inc. estimates that equity investors underperformed the S&P 500 by roughly 6% per year over the last 20 years¹.

Why We Chase Returns

There are two primary reasons it feels right to buy after we witness gains and sell after experiencing losses:

1. We are greatly influenced by what just happened. Whenever we try to project the future, our brains are significantly influenced by what just happened. Things were just good implies that things will be good going forward, and vice versa.
2. This is exacerbated by the narrative of the day. Our brains love a good story. We seek information to understand. When the market goes up, the narrative is often positive, leading us to feel good about the future. When the market goes down, the narrative is almost always negative, reinforcing a negative outlook.

Normal, But Not Beneficial

It is completely normal to invest in things we expect to go up and avoid assets we expect will go down. In fact, any rational person would do that as part of their investment strategy. But the problem is that markets move quickly and often surprisingly. Narratives are wonderful and can be quite accurate in hindsight. They can even increase our confidence in a certain viewpoint, but narratives offer no predictive ability in future outcomes.

This is why I advise you to remain disciplined to your plan and stay the course. I recognize this is not easy; temptations abound that are pleasing to our mind and feelings. But that is why you have me. Together, we can be aware of common investment pitfalls and ensure that all investment decisions are well-thought and in line with your stated objectives.

– Scott

For centuries mankind has been searching for happiness. Regardless of culture, social status, or beliefs it seems that we are all connected by our desire to be happy. What makes someone happy and how much happiness we feel may be subjective. But there are a few fundamental principles that tend to detract and add to an individual’s happiness.

In difficult or uncertain financial times, it can be helpful to take a step back and assess what makes us happy and what doesn’t. The good news is that everything that leads to lasting happiness is in our control.

What Doesn’t Bring Happiness

Money, power, and prestige don’t bring happiness. Yes, they can provide certain opportunities that people may value, but they can also cause misery. The evidence is all around us. Money, power, and prestige can have insatiable appetites. Rather than feeling satisfied and content, we may feel urges to pursue more of it. This hedonic treadmill continues as we amass more, while never becoming satisfied.

The incessant pursuit of “more” often brings about negative feelings and behavior such as selfishness, backbiting, and egotism. Those are not the fruits of someone who is happy. But those are the qualities we see among many of the rich, famous, and powerful.

Three Drivers of Lasting Happiness

1. Altruism/Selflessness. It is human nature to be selfish; us before them. Yet those that can rise above that instinct and sacrifice their own time, pleasure, and/or possessions for others find a huge return on investment. A return that is better than money.
2. Positivity. There is so much negativity out there. In the daily news and even in comedy. Many seek laughs by putting other people down. It may provide a moment of thrill or happiness, but it is fleeting. We can find more enduring happiness by talking well about others and choosing to see the good in other people, even those we disagree with.
3. Gratitude. People that demonstrate gratitude, especially for the little things, exude happiness. Gratitude helps us be less selfish, think highly of others, and keep our ego in check. Maybe we could say it’s the antithesis of unhappiness.

Our circumstances certainly play a role in how easy it is to feel happy, especially those moments when we experience a burst of intense happiness. But lasting happiness is more a function of how we think and act. While the world and markets may be uncertain and volatile, we can take comfort in knowing that much of our lasting happiness is within our control. 

– Scott

Sometimes investing is easy, sometimes it is more difficult. The last decade, except for a handful of temporary corrections, has been relatively easy. It consisted of very low interest rates, low inflation, and lots of fiscal and monetary stimulus. And stock markets were quite positive. Since 2009, the S&P 500 annualized nearly 16%¹.  So long as investors didn’t bail during one of the temporary corrections, they did quite well.

Decision Making Under Uncertainty

Investors face a very different environment today. While the future is always uncertain, today’s environment may be even more uncertain. We are living in a time of increasing inflation, increasing interest rates, and tighter fiscal and monetary policy. We aren’t used to this.

Making good decisions is always desirable. But when we face greater uncertainty, it is important that we trust whatever decision we make. A decision that looks to be “bad” in the short term can be quite profitable in the long run, and vice versa. So, how can we develop greater confidence in our decisions and trust them, even when they may not look so great in the short run?

Three Steps to Trusting Your Decisions

1. Take Your Time. It is normal and natural to react to things based on emotions and intuition. The brain wants to solve things quickly, so we need to engage the reflective part of our brain by not reacting hastily and seeking additional information.
2. Gather Information. We should spend a significant chunk of our time gathering information, including contradictory information. This helps us see things from various points of view rather than the loudest, or most repeated, viewpoints.
3. Talk It Out With Me. I would love to help you gather information, ask the right questions, and have a thoughtful discussion. Including an honest and objective 3^rd party to help you think and talk through things is one of the best things we can do anytime we face an important choice.

We cannot control nor predict the markets, and that is OK. Because we can control how we think, analyze, and respond to the markets. I have found that how investors respond has a significant impact on their ultimate results. I am here to help you obtain the best results, despite challenging markets.

– Scott

1. S&P 500 Index from 01/01/2009 – 12/31/2021 with dividends reinvested. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.

Memorial Day is a time of remembering, reflecting, and honoring those who gave the ultimate sacrifice for the freedoms we enjoy today. The act of remembering often brings feelings of gratitude, love, and a desire to do good to others. It is positive and empowering.

While remembering can be very powerful with respect to certain holidays or important dates, such as anniversaries and birthdays, we don’t have to wait for a special day to unleash the power of remembering.

We can remember an individual, a circumstance, or any event in our life to get greater meaning and purpose from it. And, ironically enough, when we take time to remember and reflect on the past, we often develop better perspectives to tackle the future.

Remembering and Investing

As investors, we can also remember lessons we learned from the stock market and even through our own prior decisions. Every investor has made mistakes; the question is whether we remember those mistakes and have a plan to improve on it in the future.

For example, investors have a great ability to hold onto securities that have gone down in value. At least they can hold on to initial losses and/or for a certain period of time. But at some point, many investors get exhausted and impatient. They have a knack for selling en masse near market bottoms. That is because it is darkest near the bottom and imagining any recovery may seem like nonsense. “This time is different” they say.

And perhaps one of the most important things to remember during a period of temporary losses, especially those that may be swift and severe, is how much you have made over the past five or ten years. Taking a longer view can help us put the current commotion in proper perspective.

And that is the power of remembering. Whether it is remembering where our freedoms came from, important people in our life, or how the markets work, remembering improves our perspective and, therefore, can improve our future decisions, in life and with respect to money.

– Scott