August 2020 | Posted By Scott Krajacic

“Gold is stupid. But selling stocks to buy gold is beyond stupid; it’s historically insane.”

While we would be hard-pressed to call anyone stupid, we do share in the general sentiments of author and speaker, Nick Murray: that the recent gold rush may be over-extended and not the most logical move for investors playing the long game.

Let us share some context to help explain.

Fiscal and monetary policies that were enacted this year as a result of the COVID-19 pandemic have sparked a growing concern with how these large amounts of debt will ultimately be repaid. A rise in tax rates is certainly possible, but a more prominent fear we hear among investors is an uptick in inflationary pressure. This is leaving many to seek a safe haven beyond the traditional stock market.

This year alone gold has seen an increase of 30%, but as recency bias would show us, many seem to have forgotten the dismal performance of the 80s and 90s. During this 20-year stretch gold had returned -2.8% per year while inflation rose at a steady 4%. Not much of an inflation hedge especially when compared to the S&P 500 Index that returned almost 18% per year over the same period. When we look at even longer periods of time we find that by participating in the stock market an investor would have earned almost 3 times as much as gold.* How’s that for an inflation hedge?

Maybe Nick’s words are a little harsh for some, but you can see why we’re not ready to abandon our philosophy for the hot investment du jour.

*From January 1970 – June 2020

August 2020 | Posted By Katie Ackerman

This week we celebrated Abby Crimmins’ second year with HIG and Scott Krajacic’s first. Abby, a huge asset to our team, has taken the reins from John Reagan and now leads the Client Service team. Millennials often get a bad rep for being lazy – but Abby continues to disprove that stereotype every day. Her standard of excellence, can-do attitude, and friendly demeanor have quickly earned the trust of our clients and her teammates alike. Scott is the leader of our Investment Policy Committee and by far the most in-shape member of our team! He has helped improve client relationships by providing clarity to complex questions through technical analysis. 

In addition to celebrating anniversaries, we also said farewell to our summer intern, William Bartnett. He was a natural fit on the team and a positive energy source. We immerse our interns in important projects, gaining from their fresh perspective and ideas. William described his experience as “being surrounded by positive focus, growth mindset, and relentless agitation towards excellence.” William gifted our team a signed copy of William Danforth’s I Dare You for our HIG book collection. A quote from Danforth’s book: “I dare you, whoever you are, to share with others the fruits of your daring. Catch a passion for helping others, and a richer life will come back to you.” William will be missed.

To learn more about our internship opportunities, email jobs@hillinvestmentgroup.com and visit our Careers page.

August 2020 | Posted By John Reagan

With Democratic Presidential candidate Joe Biden recently releasing his proposed tax plan, we thought it would be good to compare what Biden is proposing to our current tax law. Here is a simple side-by-side comparison of some of the major differences. What does this mean for clients of Hill Investment Group? At this point, not much. While Biden’s proposed plan is certainly different from current law, and in some cases significantly different, we are planning for the future, but aren’t making any changes to clients’ plans (at least not yet). As always, if you have specific questions about your specific situation, please call or email us to set up a time to talk.

August 2020 | Posted By Buddy Reisinger

Dan Villalon is a true renaissance man, with a deep technical love for, and expertise in, investing, winemaking, and woodworking – specifically surfboards and ukuleles. It’s one thing to understand the basics of a complex and intricate topic, and quite another to be a maker. Not to mention, being able to teach and explain the way Dan does.

During the pandemic, do-it-yourself became almost a cliché. Bread, anyone? Our team was just as guilty of this trend, discovering the liberation that comes from learning how to build on your own. After listening to Dan, we’d argue the source of that liberation comes from deeper understanding and appreciation for how things are made, and for the people who do the making. In this episode, Dan elaborates on how renowned American physicist Richard Feynman changed his life with the quotation “What I cannot create I do not understand.”

More about Dan Villalon

Dan is the Managing Director and Co-Head of Portfolio Solutions Group at AQR Capital Management. In his role, he oversees the team responsible for advising clients on portfolio challenges, developing custom analysis and writing white papers and other research. Dan is also a member of AQR’s Multi-fund Investment Committee, which oversees the design construction and implementation of multi-asset multi-strategy portfolios. Listen below or click here to listen on Apple.

August 2020 | Posted By Nell Schiffer

Image from Vanguard.com

“Bad news and ill omens can make the market appear riskier than many investors would prefer,”  wrote Vanguard in their recently published lessons on their website. “But if you take the long view, things might not seem so bad.” We love that Vanguard, the second-largest mutual fund company on the planet, used our trademarked phrase. Obviously, we agree. 

See it Here

August 2020 | Posted By Henry Bragg

The next book about money we plan to read is The Psychology of Money – Timeless lessons on wealth, greed, and happiness. It is scheduled to be released on September 8th and is getting the buzziest reviews we have heard about any finance book in 2020. It’s authored by Morgan Housel, who readers of this email will recognize. Housel uses 19 short stories to explore the way people make financial decisions. “Important decisions are often made at the dinner table, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together.” 

“It’s one of the best and most original finance books in years.”

Jason Zweig

*Pre-order here if you are as excited as we are.

July 2020 | Posted By Nell Schiffer

If you’ve been hunting around our website recently, you might have noticed a link to our Client Relationship Summary (Form CRS).  This new regulatory document helps investors answer the question, “Is Hill Investment Group the right investment advisor for me?” It’s aimed at anyone who is curious how we can help. 

In our opinion, it’s a great move by regulators. It makes important information about advisors and broker-dealers crystal-clear, like fees, services, disciplinary information, and their fiduciary obligation (audio clip). As an existing or prospective client, we encourage you to check it out. You might learn something about us you didn’t know before, maybe even ways in which we can be more helpful to you!

July 2020 | Posted By Scott Krajacic

 

After 10 years of large companies earning record-breaking returns, any reasonable investor would start to wonder, are small companies even worth hanging on to? We argue yes. Why? Because evidence shows owning small companies pays you more over time and helps your portfolio recover better after a downturn, but only if you have the patience to wait. 

Higher expected returns. Evidence shows that small companies have historically outperformed large companies over the long-term. The reason? The market perceives small companies as riskier investments. The extra return you get is the market paying you for taking on that risk. If you think about it, this is intuitive. A simple example: would you lend money to the mom-and-pop diner down the street at the same interest rate as you would to McDonald’s? Of course not. You recognize the additional risk inherent in the smaller, less established diner compared to the more stable, global, fast-food chain.

Stronger recovery after a market correction. When the market declines, small companies tend to perform worse than the general market, and investors may start to question if this asset class is one worth hanging on to. The biggest concern we hear is that smaller companies have less capital and cash flow to weather the economic storm thereby making their recovery painfully slow. In reality, small stocks have a tendency to come back stronger and faster after a significant market correction. The data in the table below suggests a healthier small company recovery (Russell 2000) compared to large (S&P 500) over three of the largest market downturns in the last 40 years. 

Data generated using returns data from Dimensional Fund Advisors Returns database. Please note the performance data uses monthly calculations and does not signify the exact day of the corresponding market bottom.

The role of patience. The additional return you get for owning smaller companies can materialize at any time. But we know, especially in times where large has outperformed small for a decade or so, having the patience to wait can feel next to impossible.  This is where the role of an advisor is key.  It’s only natural after years of underperformance to want to bet on whatever feels like the winning horse. Without having someone to hold our hand any of us, including professionals who know better, have a hard time waiting it out. Our take on all of this: While we see many non-client investors run from small stocks, this as an opportunity for our clients to buy what’s on sale and reap the long-term rewards of remaining disciplined.