- We believe successful investors act continuously on a goal-focused plan while failed investors react to market conditions and headlines.
- Risk is the probability you fail to reach your most cherished financial goals. Investing has the objective of minimizing this risk.
- “Outperformance” of some benchmark by a portfolio cannot be consistently delivered. It also happens to be meaningless in the context of a financial plan. We pursue excellent long-term, real-life results.
- A critical determinant of a family’s long-term portfolio returns is their behavior during market downturns. In October 2007 the S&P 500 closed at a record high of 1,565. By March 2009, it had fallen 57% to 677. A new record high was reached again in April 2013.[i] Thus, between October ’07 and April ’13 it mattered much less what investments a family owned and much more whether they remained invested.
- Since 1926, the long-term compound rate of return of large-company equities is ~10%[ii] and of bonds is ~6%.[iii] Inflation compounded at ~3% during this period.[iv] Therefore, over the last century, the real compound return of equities has been well over twice that of bonds.
- The superior long-term returns of equities relative to bonds is the market’s way of pricing in the greater volatility of equity returns. This volatility reflects the global economy’s long-term advance punctuated by occasional declines. Market timers trying to have one (superior returns) without the other (temporary declines) pursue a fool’s errand.
- Human psychology makes it nearly impossible to differentiate between temporary declines and permanent loss of wealth. A wise advisor differentiates between the two and acts accordingly.
- We do not know what sectors or asset classes will perform the best this month or this year. Neither does anyone else. Therefore, we diversify across many of them and rebalance when prudent.* Trying to guess the next hot stock/sector/etc. is speculating masquerading as investing. We are investors, not speculators.
- We do not know what the market will do tomorrow, but we do have a reasonable level of certainty regarding what it will do over the next 30+ years. Thus, we spend much less time thinking about the market today and much more time ensuring you give us a high five when you’re 90 years old.
- We cannot control the market’s day to day fluctuations, but we can control your tax exposure. Lower taxes = higher after-tax returns.
*Neither asset allocation nor diversification guarantee against investment loss. All investments and investment strategies involve risk, including loss of principal.
Content here is for illustrative and educational purposes only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.
This commentary reflects the personal opinions, viewpoints, and analyses of Resolute Wealth Management. It does not necessarily represent those of RFG Advisory, clients, or employees. This commentary should be regarded as a description of advisory services provided by Resolute Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.
Advisory services offered by Investment Advisory Representatives of RFG Advisory, LLC ("RFG Advisory" or "RFG") a registered investment advisor. Resolute Wealth Management and RFG Advisory are unaffiliated entities. Advisory services are only offered to clients or prospective clients where RFG Advisory and its representatives are properly licensed or exempt from licensure. No advisory services may be rendered by RFG Advisory unless a client agreement is in place.
[i] YCharts, SPX Fundamental Chart Level 10/01/2007 – 05/01/2013
[ii] Historical Returns on Stocks, Bonds, and Bills: 1928 – 2021. Stern. NYU, January 2022.
[iii] Historical Returns on Stocks, Bonds, and Bills: 1928 – 2021. Stern. NYU, January 2022.
[iv]https://equitable.com/retirement/articles/inflation-and-long-term-investing