posted on July 14th 2015 in Austin CFP Team Posts & Market Commentary with 0 Comments /

“I am indebted to my father for living, but to my teacher for living well.” –Alexander the Great


Every day of our lives presents us with moments. Moments that can affect us for years to come. This past quarter presented itself with many moments that contrary to what some might be saying are not much different in their machinations than previous decades on the global stage. The Greek and Euro crisis, China’s market shenanigans, California’s drought, interest rate pressure…the list goes on. These things and more can shake our confidence. People have a hard time remembering the resilience of the financial markets to endure and create new opportunities during difficult times.  Let’s explore how these crises affect us.


Pundits love to say, “this time is different” for many reasons, including self-promotion and sales. Comments like this naturally scare many investors. The nuance of life is that things and experiences are both the same and different at the same time. For example, I could play the same song on my guitar twice in a row. Some might say it’s the same song. Some might say it’s different. They’re both right. It’s exactly the same song played in two separate performances and thus uniquely different.


What’s different about the current financial atmosphere from what we’ve seen before? Essentially everything. Different variables, new players, and a different time.


What’s the same about the current financial atmosphere from what we’ve seen before? Essentially everything. Investors start getting fearful or unhappy with the outlook or their financial options. As a result, they hear predictive doomsday scenarios and feel compelled to make changes. Then markets press through their volatile periods and over time adjust accordingly to provide long-term diversified investors with healthy returns. And, those investors who did not have the wisdom of this insight or the emotional support of a good financial advisor go back into their wealth-destroying cycle of investment gambles driven by emotions.


With this in mind, I’ll relate a conversation of  client of mine whose friends are somewhat perplexed by his calm outlook regarding his investments. They are asking: “What’s the safest place to be? What do you do with your money?”


Let’s look at what we would consider safe, as safe does not mean hiding assets under the mattress. Safe would have these qualities:

  • Resilience to come through any market cycle.
  • Liquidity (easily accessible/convertible to cash).
  • Strategically planned so not forced to sell an investment that’s down in value.
  • Growth above inflation over time, adjusted to risk.


Given these criteria, the answer is not cash, a specific sector, a specific country, or a single investment. The safest place in a crisis is a globally diversified portfolio.



2015 Q2 Index and Model Portfolio Review

Screen Shot 2015-07-14 at 4.34.15 PM










(Table Disclosures and Performance for periods greater than one year are annualized. Selection of funds, indices and time periods presented are chosen by the client’s advisor. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Russell data copyright © Russell Investment Group 1995-2013, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright © MSCI 2013, all rights reserved. Barclays Capital data provided by Barclays Bank PLC. * 100% globally diversified stock portfolio net of expenses and fees.  ** 60% stock 40% bond portfolio net of expenses and fees.


Given all the volatility during the second quarter, indexes were relatively flat across the board, with the exception being the U.S. REIT Index which was down a significant 10.35%. Most of this movement appears to be investor perception on where interest rates are headed as opposed to beliefs about the fundamental health of the U.S. real estate market.


U.S. small companies outperformed U.S. large companies for the quarter and international equity markets outperformed U.S. equity markets, with the EAFE (Europe Asia Far East) performing the best out of all indexes at 0.84%.


The conventional wisdom has interest rates rising perhaps at the next fed meeting in September. It seems as though the bond market already has taken some of that into account, as noted in slight declines in bond indexes. If you’re worried that bond prices always fall during periods of rising interest rates, you need not worry so much; they don’t.


There is an excellent study of four periods of rising interest rates for the last 30 years and their effect on prices for two bond indexes. Surprisingly, there was only one index in only one of those periods where the value dropped. The bond indexes actually had positive returns for the remaining measurements, for all periods of rising interest rates. The important point is that bonds can play an important role in your portfolio regardless of where you think we are in the interest rate cycle. Please email me to request a copy of the study at


For diversified investors who are only looking at the past year or so of performance and are impatient for their returns, it will have been a potentially frustrating period. Those investors who have experienced longer periods of diversified investing the right way are more at peace, having the wisdom of knowing that if you want your money to last a long time, you must correspondingly have a long view, and the numbers in the chart support that.


Essentially, we have spent long, hard hours studying and examining the financial markets and how they can both help and hurt investors. You could consider us masters of finance who have learned from the brightest Ph.D.s and Nobel Prize-winning academics on our clients’ behalf. Just as importantly, we have learned that the roller coaster of emotions investors experience, sometimes on a daily basis, can be their worst enemy when pursuing successful financial outcomes.


Yes, your worst enemy in the pursuit of successful financial outcomes is most likely your own emotions. We’re here to remain at our posts and help you through both good and bad market periods so your enemy can become your ally.


Cue up the second Greek quote:

“He is a man of courage who does not run away, but remains at his post and fights against the enemy.” —Socrates


If you’d like to discuss any of these concepts with me, feel free to schedule a time on my calendar here:


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