A Single Philosophy

IMG_1134Without a cogent investment philosophy, it is easy to let emotions become the driving force behind financial decisions. We strive to guide clients towards a simple philosophy of investing “on purpose, for a purpose”. We strongly believe that markets work and, while not “perfectly efficient”, the markets reflect the collective wisdom of millions of participants.

The juxtaposition of data and emotion creates an interesting starting point for understanding the importance of having a single philosophy. A veritable mountain of research and data support the framework of “the markets work” philosophy. The reason everyone doesn’t adopt this strategy, however, is their emotions get in the way. A recent article in The Wall Street Journal titled “Actively Managed or Index Funds? Why Not Both?” is emblematic of many who think it is plausible to essentially have no philosophy.

 

Harness the Power of the Markets

The best example of how this philosophy is put into practice is by using what is called asset class investing. The most basic tenant of asset class investing is that the whole idea of attempting to out select or out time the market is doomed by virtue of simple arithmetic. There are 2 sides to every trade (a buyer and a seller). For everyone that outperforms, there is another that underperforms; a zero sum game. Add in trading costs, and the difficulty of outperforming the market, over the long term, becomes all that more difficult.

The better idea is to harness the power that resides within the markets, within the collective wisdom of all those investors. The markets can be a tool for our good if we don’t let our emotions derail us. This is our single philosophy. Ready for a real conversation?

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