It’s no secret that 2022 was challenging for both the stock and bond markets. Stocks ended the year down 18%*, while bonds were down 13%**. How did we do in 2022? Thanks to our compliance group, all we can say here is that our strategy of investing in low-cost, diversified strategies that tilt toward small, value, more profitable stocks meaningfully outperformed the S&P500 index in 2022.
As much as I would like to pat our firm on the back, you know our refrain: one year is essentially meaningless when it comes to investing. Due to the volatility and randomness of markets, any strategy can outperform or underperform in any given year. Our strategy certainly does not outperform every year and can even underperform several years in a row. To have real confidence in an investment strategy’s reliability, investors must look at how it performs over decades, not just years.
To see how we measure up over the long haul, we go back as far as we can, looking at the investments we recommended each year (and own ourselves) to see how our philosophy has held up over time. Our favorite chart compares the value of a hypothetical $1 invested in the year 2000 to 2022. Some of you may be familiar with Paul Harvey’s famous line regarding “the rest of the story.” Shoot me a note at firstname.lastname@example.org for the details and the rest of the returns story. We can share how our recommended equity strategy has performed over time and the magnitude of the benefit of taking the long view.
If you have been a client for a while, you have likely seen the benefit of a long-term, evidence-based strategy show up in your portfolio. If you’re not a client, ask yourself why. Then pick up the phone and call us. You can schedule a call with me anytime here.
“Each year, some investors manage to do it (beat the market), of course, but can they do it consistently? A new study of actively managed mutual funds by S&P Dow Jones Indices asked that question and came up with a startling result. It found that not a single mutual fund — not one — managed to beat its benchmark in either the U.S. stock or bond markets regularly and convincingly over the last five years.“
We don’t know when to stop.
At least, I sure don’t.
Sometimes, on the way home from work, I’ll swing by the grocery store, buy a pint of ice cream, and eat it.
That’s right. The whole thing.
Yes, I know. That’s a LOT of ice cream.
I’ve noticed that a very interesting thing happens when I do this:
Bite 1: Best thing in the world, ever.
Bites 2-10: Really good.
Bites 11-15: Good.
Bites 16-20: Meh.
Bites 21+: OK, now I’m sick.
I learned this lesson the first time I ate a pint of ice cream in a single sitting.
And yet, for some reason, I still occasionally repeat the experiment.
Of course, this phenomenon doesn’t only occur with ice cream. This is a well-documented economic principle called Marginal Utility, and, you guessed it, it applies to money, too.
Beyond a certain point, having more money will not lead to more security, freedom, and happiness.
Because security, freedom, and happiness do not come from more money (at least, not beyond a certain point). They come from knowing when to stop.