posted on October 15th 2019 in San Diego CFP Team Posts with 0 Comments /

It’s always good to step back and get perspective. The stress and anxiety of our daily lives can often lead people to excessively focus on the wrong things, causing them to completely forget about the overall mission. My mission is clear and committed: partnering with my clients for long-term financial and life success.

There’s a great quote from Marcus Luttrell, former Navy SEAL team operator and the central character in his book and movie, “Lone Survivor”:

“Fear is a force that sharpens your senses. Being afraid is a state of paralysis in which you can’t do anything.”

This is a great distinction I’d never thought about before I read it. If fear of the markets and your financial future is part of your emotional landscape, that’s okay. But, let it be the force that sharpens your senses and strengthens your conviction to implement an investment philosophy and stick with it. 

On the contrary, being afraid and having paralysis with your decision-making may produce results that leave your financial scenario in a shambles. As a matter of fact, David Booth, co-founder of Dimensional Fund Advisors, states the following:

“The most important thing about an investment philosophy is that you have one you can stick with.”

WorthPointe has an investment philosophy grounded in academic research and real-world implementation. Our investment philosophy includes the idea that investors have historically been rewarded by the risk of pursuing higher returns via certain elements in the equity markets. Conversely, it embraces the idea that your bond portfolio should be a relatively safe haven. You might find it surprising that many investment strategies deviate greatly from this philosophy and you might not even know it unless your portfolio is properly analyzed. We aren’t surprised, as we see it quite frequently.

One of the most challenging aspects of our jobs is encouraging investors to stick with it. Some advisors might change their philosophy willy-nilly based on market cycles or client emotions to make clients temporarily happy. We risk not looking like the other guys because we have a clear investment philosophy we help our clients stick with; research tells us investors have historically been rewarded over time with this approach even through periods where being afraid might cause them to act otherwise. 

And herein lies one of the secrets to our clients’ success: there’s a difference between facilitation and advice. Good advice does not mean doing whatever someone wants, as this often just facilitates continued bad decision-making and bad results. Advisors must have strength and conviction their clients understand — so those clients don’t get yanked around by the latest news cycle and chatter from friends and neighbors. 

Conviction implies discipline, which is very difficult to do over our lifetimes without help from advisors with a clear, well thought-out, grounded investment philosophy. Fortunately, we have the experience and expertise to help our clients complete the mission through the future challenges and rewards life has on offer.

Finally, I’ll leave you with a quote from one of the guys we look to when implementing our investment strategies, Robert C. Merton, an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management who’s known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes–Merton model. It’s this type of wisdom from thought leaders in finance that gives us conviction for the mission.

“Timing markets is the dream of everybody. Suppose I could verify that I’m a .700 hitter in calling market turns. That’s pretty good; you’d hire me right away. But to be a good market timer, you’ve got to do it twice. What if the chances of me getting it right were independent each time? They’re not. But if they were, that’s 0.7 times 0.7. That’s less than 50-50. So, market timing is horribly difficult to do.”

2019 Q3 Index Review: Index Returns Through September 30, 2019

Table disclosures and (http://worthpointeinvest.com/disclaimer/) 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 © Published and maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group,, all rights reserved.www.ftse.com  The S&P data are provided by Standard & Poor’s Index Services Group.  www.spdji.com MSCI data copyright © MSCI 2013, all rights reserved. www.msci.com. Barclays Capital data provided by Barclays Bank PLC.  www.bloombergindices.com.

When viewed as a whole, the equity indexes had a fairly flat to slightly negative performance bracketed by the S&P 500 Index representing larger growth U.S. companies at 1.70 percent and the MSCI Emerging Markets Index at -4.11 percent. The real estate markets represented by the U.S. and Global REIT indexes really shined for the quarter at 7.46 percent and 6.00 percent, respectively. Usually, your percentage allocation of real estate in your overall portfolio would be a lower percentage compared to the other indexes, so the impact is slightly muted, but it’s a classic example of the utility of diversification. All the bond indexes held up well even through the expectation of lower interest rates. 

I think the big story for all the indexes is at the three-year mark, they all have a healthy positive return despite all the real and perceived volatility in global politics and economics.

about the author: Morgan H. Smith Jr. IMBA CFP®

Morgan Smith Jr. IMBA, CFPMorgan H. Smith Jr. IMBA CFP, who has been a fee-only financial planner for over 12 years, specializes in wealth management for successful families, business owners, retirement plans and institutions requiring a disciplined fiduciary process.

An Assistant Professor at the University of San Diego, Morgan has been a frequent speaker to many professional organizations and has appeared on CNBC, Fox Business New Live and is a founding member of the Strategic Trusted Advisors Roundtable.

Learn More and/or Contact Morgan

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