Q2 Perspective: Don’t Be Scared and Don’t Get Greedy

Posted at 22nd August 2017

We hope you are enjoying the last days of summer.  It is hard to believe that students are beginning to head back to school.  In this quarter’s Perspective, we would like to provide a few updates about LifeGuide and offer some thoughts about the current financial situation.  2017 is shaping up to be a strong and exciting year.  We continue to be encouraged as we see the financial, relational and spiritual growth that our clients are experiencing.
 

LIFEGUIDE WENT TO KNOEBELS


 
The LifeGuide Team and our families very much enjoyed spending a beautiful day with 300 of you at Knoebels last month.  Part of the impact we hope to have is helping you strengthen relationships with your family and friends.   We are grateful to be able to provide a fun day to give you the opportunity to do that.  We missed those that couldn’t attend this year.  We hope you will be able to join us at future events. 
 

LIFEGUIDE CONTINUES TO EXPAND TO BETTER SERVE YOU … NOW AND IN THE FUTURE


 
It is well documented that the broader financial services industry is struggling with succession planning.  The traditional model of an aging solo financial advisor whose retirement time frame is similar (or prior) to most of their clients is of great concern.  Clients are rightfully questioning who will be there to guide them in their retirement.  Who will walk with them through the chapter of their lives that they have been anticipating and planning for all of these years?  
 
We take our mission of serving you, over the long term, very seriously.  While many other firms are struggling with this succession issue, we have built LifeGuide from the ground up to provide continuity of relationship, advice and investment management over your lifetime and that of your extended family.  We continue to hire and train high character, high capacity advisors that span multiple generations.  Our advisors work together to provide the experience and technical competence that are required to construct and implement your comprehensive LifePlan.  To this end, we have some exciting news about the LifeGuide team!  
 
If you call our office, you might hear a new voice.  We are continuing to grow our team and are pleased to introduce Matthew Hess.  Matt comes to us by way of Philadelphia, Messiah College, and the Central Pennsylvania Food Bank.  He is fully securities and insurance licensed.  Matt has also completed the coursework for and passed the Certified Financial Planner (CFP®) examination.  He will be working alongside of Zak.  Matt and his wife, Hannah, are active members of Liberti Church in Camp Hill.
 
Another new person that may answer the phone is Sarah Weber, a senior at Messiah College.  She will be interning with us for the Fall.  Sarah will be helping us improve our client communications and on-line presence.  Dalton Whetstone, our summer Financial Planning intern, will be heading back to Temple for his senior year.  Please join us in wishing both of these promising young professionals the best!   
 
We are also excited to announce that Derek Mosley has satisfied the extensive testing and experience requirements for the CFP® designation.  Earlier this year, Abby Conway earned her CLTC designation for Long Term Care, and Steve Thompson recently obtained his securities series 65 and insurance licenses.  Please join us in congratulating Derek, Abby and Steve on these significant accomplishments.      
 
While Doug and Zak have no plans of retiring any time soon (despite Doug’s rapidly greying hair), we feel that it is important for us to be intentionally planning for the next 25-30 years – just as we encourage you to do though your own LifePlanning process.  Our entire team is committed to continually sharpening our skills, deepening our knowledge, and building our firm to serve you and your family for many years to come.
 

STOCKS CONTINUE TO MARCH ON


 
Stocks have been doing well this year.  This continued momentum has led to some common themes we are hearing.  We would like to briefly address two of these recurring themes.
 
THEME #1:  “The (stock) market is at an all-time high, so now is not a good time to invest, right?  Maybe I should just wait to invest.”
 
As we unpack this statement, we feel that folks are really saying that they don’t think that stocks can continue to go higher.  This belief is certainly understandable, especially in light of the bear markets of 2001 and 2008.  Those times serve as vivid (and healthy) reminders that stocks do have embedded risk and can have significant drops in value; however, it is also helpful to remember that the market is made up of stocks, whose value is tied to real companies that are in business to grow continually and make money.  The primary mission of publicly traded companies is to maximize their value to their shareholders, which makes growth an inherent characteristic of the stock market.  In fact, CNBC market research shows “second-quarter earnings have been mostly better than expected, with growth surpassing initial expectations and most S&P 500 companies topping profit and sales estimates.”  Stocks in general have exhibited growth over the long term.  The well-respected Jeremiah Graham has written that today’s higher than historic price to earnings ratios have been in place for most of the last 20 years and are here to stay for a while. He adds that the current bull market does not have any of the characteristics of a bubble.  
 
Caution is a good thing to have with investing, but as Peter Lynch says, “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.”   Recognition of these risks is one of the primary reasons that we utilize a dynamic rebalancing strategy for our InSight portfolios.  We systematically review portfolios on a weekly (and sometimes daily) basis to make sure we are maintaining the appropriate allocation.  We sell assets that are overweighed (selling high) and buy those that are underweighted (buying low).  We believe that our contrarian management approach helps buffer the downside and takes advantage of opportunities. 
 
THEME #2:  “Why do I have bonds in my portfolio…stocks are doing so much better.”
 
It is nearly impossible not to want more stocks in your portfolio when they are performing so well. As we have already mentioned, stocks do not always go up in a straight line.  In fact, they can often be very volatile.  “Bear markets” (a 20% market drop) have happened an average of once every five years.  This characteristic needs to give us a healthy respect for the short-term risk of stocks.  If you find yourself thinking “yeah, but look how much money I’m missing out on,” you may be downplaying the risks involved.  If stocks begin to drop, bonds and real estate can help provide stability to your portfolio.  They can act as a buffer to help keep you from selling stocks low out of fear or necessity.  Think of diversification with bonds and real-estate as the ballast of a ship. The ballast is made of heavy material and located below the water line to improve the ship’s stability, so that wind and waves don’t tip it over.  Although the ballast slows down the ship in calm waters, it plays a vital role in safely completing the journey.  We see bonds the same way.  No one knows for sure when rough waters (the next bear market) will return. 
 
Shelby M. C. Davis, the founder of Davis Selected Advisors, summed up both of these points well when he said, “Invest for the long term.  Don’t get too greedy and don’t get too scared.”  We feel that you can help keep these two emotions in check by having a well thought out LifePlan and sticking to a principled investment methodology.
 
As always, don’t hesitate to contact us if you have any questions or concerns.
 
Your LifeGuide Team