Beliefs (Philosophy) – Behavior (w/ Costs) = Returns
We talk a lot these days about simplicity and clarity. The formula above is about as simple and straightforward as can be. What you believe and how you behave will ultimately determine your investment returns. That’s it – plain and simple. The hard part is connecting what you believe and how you behave into a successful long-term strategy.
When selecting a financial advisor, you are essentially buying into a belief system, a philosophy. In our case, we believe the most practical way to obtain market returns is to own a widely diversified portfolio; stay invested throughout market cycles; pay attention to costs and avoid reacting to short-term market noise. If someone wants us to select “hot” stocks and come in and out of the market frequently, we are not going to be a good fit. There are plenty of brokers / advisors that will do that. We don’t, because we do not believe that works – except by luck. We fully understand this places us in a distinct minority. The weight of actual science however supports our belief.
Beyond the overriding philosophy, we provide clients a focus on long-term financial goals so that they will be less inclined to bail out of their portfolios just at the wrong time. Markets indeed go “up and down, not up and up”. We all need to understand this reality, even if we don’t always want to.
Investment returns are not generated by magic, but by design. We believe the goals-focused approach provides a good likelihood of obtaining market returns. There is no better way.