Present day humans are simply just a ‘few’ generations removed from our caveman ancestors. Our brains are still wired very much the same. We hunker down in our caves around a fire, seeking shelter and warmth. We still experience similar feelings, such as our instinct to heard, our fight or flight response to threats, overconfidence, our perception of risk & danger, etc. Unfortunately, in investing, these caveman instincts are bad! We must continually fend off emotions of fear, greed and regret to become a Great Investor. See more on the topic of Investor Behavior in Erik Strid’s Great Investors blog series.
Adding to these already detrimental investing instincts, our newly evolved brains have been trained to account for time. Modern day humans invented a lot of things, both physical and abstract. Of the abstract, Time is still one of the more complex creations of our human brains…
Physicists, such as Albert Einstein, theorize over the relativity of time (and space – whatever that means!). Modern philosophers argue over the existence of time and whether it is real. We’re not physicists, nor do we consider ourselves philosophers. At Concentus Wealth Advisors, we just want investors to stop paying attention to arbitrary metrics created by the financial news media and the financial industry at large. We continue to believe that time periods such as calendar years and year-to-date returns are nonsensical. We want investors to relearn what is actually important.
For instance, we live on a rock that orbits around a ball of gas in space. A couple of mathematicians noticed this happened on a regular basis and created a calendar to track the amount of time it takes for one celestial body to travel around another. Why should we anchor performance metrics around such events? More illogical than calendar years, is the year-to-date timeframe. We try our best to ignore the vagaries of this timeframe because we believe it is relatively meaningless. In January, year-to-date is 30 days of return, while in November it’s 300+. How is that helpful to a long-term investor?
Turn on the television or pull up a financial news website and you’ll have a hard time finding performance information for more than a day, or some timeframe other than year-to-date. You will also have a hard time finding this information for a Globally Diversified Index – they typically only focus on US Markets.
This is why we publish a weekly market dashboard called the “CLARITY Market Monitor” (aka the anti-CNBC/MarketWatch/Bloomberg Market Monitor). We update and tweet this market dashboard each Monday. So, if you ever want to know how the markets are “doing”, just check @concentuswealth and look for the following chart:
In the short-term, markets are simply “Up Some” or “Down Some” compared to the long-term historical returns. We suggest gaining clarity: focus your attention to the long-term performance of the global stock market.
February was another good month for stock prices, representing a continuation of the recovery started in late December through January. US Equities led all major asset classes in the month, up 3.2%. Developed International equities were up 2.7% and Emerging Market stocks were basically flat, up 0.2%. Commodities prices were positive in February as well, up 1.0% while bonds were flat to slightly negative.
We continue to draw your attention to the positive long-term results for all asset classes. To be a successful investor, you must keep a long-term perspective and accept the intra-year gyrations that come with owning risk assets.