posted on April 12th 2023 in Financial Planning & Market Commentary with 0 Comments /

When investing, it would be awesome to be super awesome all the time. Unfortunately, unlike the fictional world of Lake Wobegon or The Incredibles, reality is not very accommodating to over confident fantasies of perpetual awesomeness.

As a father of a nine year old son, I’m cognizant of the dangers that superhero shows and movies might have on the expectations of what might be possible in life. Yes, those movies are fun and have some good lessons but they are often completely unrealistic. The art of parenting is educating children on the distinction between the fantasies and expectations of these movies and the realities of life. I might add that an investment advisor’s role with clients might also exist to temper mindsets from the expectation of having super awesome investment returns all of the time to crafting intelligent portfolios that are sustainable over time. To help illustrate this point, let’s look at:

Hypothetical Growth of $1,000 January 1972 through December 2021

Hypothetical Growth of $1,000 January 1972 through December 2021 Let’s look at four different scenarios:

    1. “Perfectly Awesome Timing”: Executing the perfect readjustment strategy to the best performer between the S&P 500 and U.S. Treasuries each year in advance
    2. “S&P 500 Index”: S&P 500 index, no timing or readjustment
    3. “One-Month U.S. Treasury Bills”: One-Month U.S. Treasury Bills, no timing or readjustment
    4. “Perfectly Awful Timing”: Executing the perfectly wrong readjustment strategy to the worst performer between the S&P 500 and U.S. Treasuries each year in advance

Past performance is no guarantee of future results. Performance may increase or decrease as a result of
currency fluctuations.
In USD. Data presented in the Growth of $1,000 exhibit is for illustrative purposes only and is not indicative of any investment. The examples assume that the hypothetical portfolio fully divested its holdings of stocks (or bonds) at the end of the last trading day of any year when a switch was indicated, held the other asset for the subsequent year, and performed the exercise again at year’s end. The examples are hypothetical and assume reinvestment of income and no transaction costs or taxes. There is no guarantee strategies will be successful. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

Seeing these numbers there is a natural desire to be perfectly awesome and end up with $1,811,656 through this time period. This is where you turn to your son or daughter and tell them that the movie is fantasy and not realistic. Don’t try and fly off that building! That would be a big mistake because we know that no one has been able to perfectly predict the best investment categories in advance over long periods of time. Furthermore, and I think most importantly, attempting to be super awesome will most
likely increase the probability of being super awful resulting in less money than you originally invested; $949 in this hypothetical example.

The key point is that you should consider bifurcating investment strategies based on goals. It’s not egregious to carve out an amount of money that you can afford to lose to invest in risky investments hoping for super awesome results. But you should most likely not expose long-term/legacy/retirement funds that you cannot afford to lose to strategies that give you a higher probability of being super awful. If you are counting on your wealth to be there years from now when you need it, there may be investment strategies to increase the probability of that happening and that is what I focus on with my clients. They are happy to give up on trying to be super awesome all of the time with this particular tranche of investments thereby reducing the probability of ending up with super awful results. It’s also clear that there has been a reward for exposure to stocks over the long term.

2023 Q1 Index Review Through March 31

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]), Global Real Estate (S&P Global REIT Index [net dividends]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2023, all rights reserved. Bloomberg data provided by Bloomberg. 

Simply stated, the first quarter was an excellent quarter with all listed markets in the green with emphasis on continued robust growth for international developed stocks which speaks to the value of globally diversified portfolios. As you might know, many investors have “Home Bias” when it comes to their investment strategy which can limit their opportunities and constrain the benefits of diversification. It was also nice to see the U.S. and global bond markets recovering somewhat.

Morgan is an investment advisor in San Diego, Calif. He is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the commission. Morgan only transacts business in states in which he is properly registered or is excluded or exempted from registration. A copy of Morgan’s current written disclosure brochure filed with the SEC, which discusses among other things, Morgan’s business practices, services, and fees, is available through the SEC’s website at
Please note, the information provided in this document is for informational purposes only and investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services.
Nothing provided in this document constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation or an offer to sell (or solicitation of an offer to buy) securities in the U.S. or in any other jurisdiction.
This document may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions; changing levels of competition within certain industries and markets; changes in interest rates; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of WorthPointe or any of its affiliates or principals or any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date they were made.

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