“We don’t make investors more successful by giving them portfolios that pander to their fears. We don’t change the portfolio, we change the person – if he will permit us to do so. We do that by leading him to better temperamental values, chief among which are 1. Tolerance for ambiguity and 2. Resilience.”
– Nick Murray
In last month’s article, I shared some wisdom from the greatest investor of all time. This month, I discuss a new way to think about “asset allocation.”
To start, let me share that I am proud to announce the publication of my new book, “Clarity: How Popular Culture is Misleading You About Successful Wealth Planning and What to Do About It.”
While I was writing my book, I surveyed a group of clients and friends about some of the key wealth planning issues that were causing them confusion so that I could address them in my book. There was one response that I found particularly interesting: this “rubber-stamped” approach of being more conservative with assets as you age stops making sense if you have more than you will ever spend.
“A cynic is someone who knows the price of everything and the value of nothing.”
This week while I was surfing the internet I came across a blog post from Behavior Gap that I really enjoyed and wanted to share, “The Value of an Advisor.”
“The world into which we take this belief system will always regard it as not merely countercultural but counterintuitive. For the sake of simplicity, let’s reduce it to its essence. Once and for all, now and forever: Successful Investing is Counterintuitive.”
I am very proud to announce the publication of my second book, Clarity: How Popular Culture is Misleading You About Successful Wealth Planning and What to Do About It. The book is now available, and below you can find information on how to get your own copy!
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
– Mark Twain
Peter Lynch was the legendary portfolio manager of the Fidelity Magellan fund, and he is widely regarded as one of the most successful investors of our time. He once said that you can’t get a high school diploma in America today without knowing what a cosine is; however, millions of Americans graduate from high school every year without knowing the difference between a stock and a bond. The United States is the wealthiest capitalist nation in the history of the world, yet we don’t teach our children basic financial literacy.
“Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their ‘chart’ patterns, the ‘target’ prices of analysts, or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well.”
– Warren Buffet
In last month’s article, we made a major market call, which already appears to be coming true! This month, we point out some wisdom from the greatest investor of our time, Warren Buffet…Great Investors Listen to the Greatest Investors.
“News is a money making industry. One that doesn’t always make the goal to report the facts accurately… Fear-based news stories prey on the anxieties we all have and then hold us hostage… In previous decades, the journalistic mission was to report the news as it actually happened, with fairness, balance, and integrity. However, capitalistic motives associated with journalism have forced much of today’s television news to look to the spectacular, the stirring, and the controversial as news stories. It’s no longer a race to break the story first or get the facts right. Instead, it’s to acquire good ratings in order to get advertisers, so that profits soar.”
– Deborah Serani Psy.D. Psychology Today
You may have noticed that the stock market has experienced a few difficult days recently and volatility has picked up considerably. After yesterday’s close, the S&P is now at the same price it was at the end of November. But also know that it is still up over 12% in the last 12 months (and up 72% over the last 5 years!).
We know times like these can be stressful, so we always try to let you know our current thinking.
“Don’t just DO SOMETHING; STAND THERE!”
– Clint Eastwood
In last month’s article, we focused on “Avoiding Surprise” as one of the qualities of a great investor. This month, we urge you to read carefully because our firm is making a major “market call” and a significant prediction for the future that you won’t want to miss!
“Life is really simple, but we insist on making it complicated.”
A Great Read
Our team here at Concentus recently discovered a great article from Farnam Street that we all really loved, and we hope you will enjoy: “Complexity Bias: Why We Prefer Complicated to Simple.”
The article is somewhat lengthy, but it’s worth a read. In essence, it explores the human cognitive bias known as “complexity bias,” a hardwired human tendency to “give undue credence to complex concepts.” The article discusses two primary implications of complexity bias that I found quite interesting and that are particularly useful to understand in relation to investing and wealth planning.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
– Peter Lynch, legendary investor
The “Inevitable” Correction
Last week I had a meeting with a new prospective client that got me thinking. This gentleman recently sold his company, and had the good fortune of receiving a multi-million dollar payday, so we were meeting to discuss his financial and investment planning. We discussed the merits of investing his capital in the equity market, and he agreed heartily that ownership of a portfolio of great companies would be the best way for him to sustain his income, and maintain his wealth, over the next 30 years of his retirement. However, he had only one condition for the implementation of his investment plan: He wanted to hold off on investing his cash into the equity market until stock prices pull back, because, after all, “a major crash is inevitable.”