Every now and then I’ll be chatting to someone, and when they hear about my line of work, they assume I’m a stockbroker. Naturally, they want to know my thoughts on the market and various ‘hot’ stocks.
The funny thing is, I’m probably the furthest thing from a stockbroker. Brokers, which are far less common than in decades past, advise clients on what to buy, what to hold, and what to sell. It’s a game largely focused on trying to profit from the constant ebbs and flows in the market.
I’m not in that business. My pursuit is wealth management—specifically, the management of your wealth.
With that in mind, here are my bedrock principles for managing your wealth. These are the ideas and philosophies that shape how I go about helping you and your family live a life that is as financially stress-free as possible—and one that hopefully allows you to do the things you love with the people you love.
1: The Economy and Market Cannot be Consistently Forecast or Timed
Some economists and portfolio managers make their name by a dramatic prognostication that turns out to be correct. They deserve the credit. The problem, however, is that these ‘gurus’ often cannot replicate the success. That’s because economies and markets are complicated by their nature, and human beings are imperfect at best in trying to divine what will happen next.
Economists, for example, rarely spot recession in advance. Retail stock traders, for their part, tend to lose money over time. In both cases, as Yogi Berra once famously quipped, predictions are difficult, especially about the future.
It’s because we can’t consistently predict the markets or the economy that I believe that the highest probability of capturing equities’ long-term returns is to remain invested all the time. We know that over time, the market tends to rise—and we base your plan on many, many decades of that being the case.
2. We are Long-Term Owners of Businesses, As Opposed to Short-Term Speculators
Imagine that two people buy the same stock. One makes the purchase because they believe the company is well-run, with solid management and great long-term prospects. The other has no clue what the company does but saw the chart and figured it was likely to rise in the coming weeks.
The happens far more frequently than many may realize. Two people who are technically both shareholders, but with diametrically opposed motivations and time horizons.
We consider ourselves to be long-term owners of businesses. The fact that the companies’ stocks trade every day is not something we’re concerned about, because our aim is not to trade in and out in search of quick gains.
3. Declines in the Stock Market Have Always Been Temporary
Chances are, no matter your age, you’ve lived through some painful market declines. (Ones that come to mind: the 1987 crash, the 2000-2002 bear market, the 2007-2009 global financial crisis, and the COVID-19 crash of 2020). All felt like the end of the world when they were happening. And all proved temporary.
History shows that declines in the stock market have always been surmounted, as the world’s most consistently successful companies constantly innovate—and the economy does tend to grow over time.
4. Long-Term Investment Success Depends on Making and Sticking with a Plan
We’ve all heard the phrase “Those who fail to plan, plan to fail”. The axiom is true, but something that gets left out is you need to act continuously on your plan. When it comes to wealth management, that means sticking with investing discipline rather than letting your emotions get the best of you. In concrete terms: Sticking with your equity allocation even—and especially—when the market tumbles.
The Bottom Line
Warren Buffett once said that investing shouldn’t be exciting—and if you want excitement you should go to Vegas.
I agree. My principles for wealth management aren’t designed to be exciting. But in the long run I do believe my clients will be more than happy with the results.