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Putting Markets in Perspective

February 14, 2018

Too Clever by Half?

We were reminded of an old British quip - "too clever by half" - as we've been reflecting on the market conditions of the first few days of February. One of our goals as your advisor is NOT to be too clever by half, and to encourage you not to be either. The Oxford dictionary describes the "too clever by half" person as "annoyingly proud of their intelligence or skill, and liable to overreach themselves." The idea is akin to the Greek's warnings against hubris or the Biblical admonition against pride.

As your advisory team, we carefully study markets and the ways markets have worked over time. Yet, we simply submit that we do not know the future and never will. We cannot predict stock market actions in a particular week or year. We believe that anyone who says they can accurately and consistently predict markets by trading in and out of stocks is in great danger of overreaching themselves - too clever by half.

However, we can share how markets have worked in the past. Using this, we invest the stock side of the portfolio into the historically persistent and durable trends of each asset class according to a target time horizon. When investing for the future, history shows that stocks offer a reasonable way to keep up with inflation and serve as a long term tool for wealth accumulation. The past reveals how the stock market has worked across the myriad geo-political, macro-economic, monetary and fiscal policy environments.

Modern market history has proven that the voluntary buying of securities, by willing buyers matched with voluntary selling by willing sellers, has provided a long history of wealth appreciation balanced with liquidity. Every market participant gets what they want. The buyer gets a security at a price he/she is willing to pay and the seller gets their goal met for liquidity.

Our aim is to help you develop a plan that offers liquidity through mature, individual bonds at specific intervals. Individual bonds offer a stated coupon and the promise of your money upon maturity. Stocks offer no such promise on a specific or certain day in the future. Yet, stocks historically have offered great appreciation that can be harvested over time, just not on a stated or predicted day.  

Given the last week's stock market swings, we wanted to offer some additional historical context for your consideration. Click below for a brief 5 minute presentation on a few slides that we thought may be of interest.


Additional resource from our strategic partners at Dimensional Fund Advisors