Summary: Third Quarter 2017
"If you can keep your head when all about you are losing theirs..."
- Rudyard Kipling
The opening line of Rudyard Kipling’s “If–”, a poem written in 1895, is often quoted when markets are in freefall and investors are panicking. There is obviously a lot more to the poem, but this line is used in this context to remind investors that if one can keep from panicking, there is opportunity in others’ inability to control their fears.
As true as that has been during market selloffs, it is equally true when markets continue to surge higher and valuations become increasingly stretched. Investors don’t typically panic per se during bull markets, but they do slowly succumb to greed and FOMO (fear of missing out). These forces can be every bit as damaging to a portfolio and in many ways are even more difficult to resist because they build over time and become easier to rationalize the longer a bull market lasts.
This cycle will be no different and we’ve certainly witnessed actions by some investors the last few years that they will regret in time. The specific mistakes are always different, but they have common themes: investors forget the benefits of diversification as they plow more money into their winners and sell their losers; they buy based on momentum with no regard to price; alternatives become almost a dirty word, and they focus on all the positives while dismissing the things that could go wrong. Investors are still willing to acknowledge that markets can go down, but they forget just how painful that feeling is and overestimate their ability to weather the storm.
It would certainly be easier to always be positive and tell people what they want to hear, but as a trusted fiduciary and advisor, it is our role to keep our heads while others may be losing theirs. That applies equally to both up and down markets. With the collective years of wisdom at Smith & Howard Wealth Management, we’ve experienced plenty of both. That experience allows us to continue to see the value in diversification, stay focused on where the best values are, and appreciate that alternatives will play an important long term role in helping clients achieve their financial goals.
As always, we invite you to call us with questions and to learn more about our view of the market in these articles from this quarter's Your CFO Report:
Unless stated otherwise, any estimates or projections (including performance and risk) given in this presentation are intended to be forward-looking statements. Such estimates are subject to actual known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected. The securities described within this presentation do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in such securities was or will be profitable. Past performance does not indicate future results.