Weekly Observations for 6/1/2018 — Behavior Gap, Phone Calls, and Promises

It’s now June, and the majority of investment asset classes are either flat or slightly down year-to-date. A typical diversified or “balanced” portfolio has lost between 1% and 2% of its value in 2018 as stocks have moved sideways and interest rates have spiked higher.

This has prompted investors near or in retirement to begin wondering if they are alright. Let me be clear — YES! Downturns of 10% to 20% are normal, expected, and “baked-in” when we analyze a client’s retirement readiness. At only -1% or -2%, the market movement this year doesn’t really register on our list of potential long-term problems.

Other investors are scanning their list of managers and assets and wondering if they should invest more in what has been performing well over the past year or so. This is precisely the opposite behavior an investor should be following. You should instead be asking what is down the most since that is where capital can be most profitably invested going forward. Meb Faber had a great discussion on his podcast this week about a similar conversation with one of his clients. Even sophisticated investors fall for this behavioral gap! Jump to minutes 4:20 through 9:00 at https://www.stitcher.com/ podcast/the-meb-faber-show/e/ 54695727

A number of clients have asked me in the past week for sources to learn more about investing, behavioral pitfalls, and how to become a better investor. Meb’s podcast (and his books) are a great start if the finer points of investing are something you want to learn more about.

As questions related to approaching retirement or investing (or any other planning matters) come to mind for you, I want to be certain you know that you can call anytime. In the past few weeks, clients have patiently navigated scheduling a time to call to discuss things that are on their mind. Please do whatever is most convenient for you; but know that without exception, all client phone calls are returned same-day, and there’s a good chance Patrick or I will be available when you first call, so don’t hesitate to give us a ring (or text/email)!

Last week, I promised to follow up on our “simple retirement” discussion by addressing the inflation component of generating retirement income. I prepped that for you this week, but want to take some time to illustrate the income approach clearly — it is slated for next Friday’s Weekly Observations.

Have a great weekend! I look forward to speaking with you soon.