facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog search brokercheck brokercheck
%POST_TITLE% Thumbnail

Quarterly Client Update Q2 2021

We hope you had a great 4th of July weekend. Our kids loved the hot weather. This summer feels much better than last summer as the country is opening up and life is getting back to normal. You might have also noticed that US and international markets continued to move higher in Q21

Charley Ellis, the prolific author, professor and investment consultant, gave a timeless speech many years ago in which he described the three ways to beat the market2. The first way he describes as “physically difficult”. Essentially this path to outperformance comes by outworking everyone else. First in the office, last to leave, read every report...you get the idea. This is the path nearly all investment professions take despite the fact that the odds of success are so low – over the past 20 years only 19% of stock managers and 11% of bond managers outperformed their benchmark3.  

The second path is “intellectually difficult”. It is a path reserved only for those with a deep and profound understanding of investing and a nearly prophetic ability to see the future. These are the Warren Buffett’s and John Templeton’s of the world. Ironically, they are usually only admired in retrospect and are often seen as misguided when making their best investments.

We suspect that you might feel like us after reading those two options; knowing that we aren’t intellectually gifted enough (to put it kindly) to go down the second path and trying to outwork all of Wall Street to go down the first path doesn’t seem like the work-life balance we’re all looking for. Fortunately, there is a third way, the “emotionally difficult” path.

Mr. Ellis describes this path as “simply to work out the long-term investment policy that’s truly right for you and your particular circumstances and is realistic given the history of capital markets, commit to it and – here is the emotionally difficult part – hold on”.

That might sound familiar as one of our Core Values is “Invest in the Market – Do Not Attempt To Predict It” and this concept is also a foundational principle of our investment management strategy. The reasons this approach is so difficult are numerous: the financial media telling you to make changes on a minute by minute basis based on “breaking news”, the neighbor kid making a fortune on his Meme stocks, and the online newsletter predicting a bear market to start this week. In the midst of all this we recommend you simply ”hold-on”. Easy to say but hard to do.  

This is too difficult for some, and they will usually end up paying a high, often very high, cost to travel the first or second path in pursuit of beating the market. Unsurprisingly, we think you are on the right path. Our goal is to help you focus on financial planning (controlling what you can control) and using an investment approach that is built on theoretical and empirical research (for more see Why We Use Dimensional Funds). We have also begun creating Investment Policy Statements for each of you that give more detail on the mechanics of your portfolio that will hopefully give you the confidence to “hold on” when things get crazy.   

We’re here to help guide you along the emotionally difficult path of investing, which essentially can be boiled down to having the correct temperament when thinking of your portfolio. Wall Street Journal columnist, Jason Zweig, describes this temperament as “self-control over self-delusion”. To paraphrase Zweig, self-control is sticking to your investment policy statement while self-delusion is convincing yourself that the new investment fads are the ticket to financial security. This temperament is something that takes place over your lifetime, and we certainly acknowledge that it can be unrewarding along the way, but we truly believe it will be worth the effort in the end. As always, we are here to answer any questions or concerns you may have as you navigate this emotionally difficult path, so please do not hesitate to call or email.

1Source: Dimensional Fund Quarterly Market Review Q2 2021, Russell 3000: 8.24% return in Q2, MSCI World Ex USA Index: 5.65% return in Q2

2Investment Policy and the Competent Stranger, The Empire Club of Canada Addresses, Charles D. Ellis, April 7th, 1988

3Mutual Fund Landscape 2021, Dimensional Fund Advisors

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.