Broker Check

People Are Wrong...

January 01, 2017
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We have a running joke at the Denver Wealth Management office that “people are wrong, all the time.” To be more specific, we should say financial pundits and forecasters are wrong all the time. </>

Think back to the day before Election Day – Monday November 7 th , the world was certain of two things.

  1. Hillary Clinton will very likely be the next president
  2. If by some miracle Trump gets elected the stock market will crash. 

From Wall Street to Washington these 2 assumptions were very widely held, with many investors moving investments to cash to prepare for the panic that would accompany any election upset. We at Denver Wealth Management know our limitations and one of the first limitations you will hear us discuss, is the inability to predict stock market fluctuations.

Warren Buffett has a great quote on stock market predictions that we believe “We have long felt that the only value of stock forecasters is to make fortune-tellers look good."

So we did what we always do – position our clients assets in the way that we think is best suited for their situation in life, batten down the hatches, and prepare for stormy weather. But it didn’t show up in the stock market where everyone expected it – it appeared in the fixed income market where bond yields spiked up dramatically, causing a drop in bond prices.

When I see our most successful clients and look at the track records of our most successful fund managers, I realize that the trait we all share is patience. In fact patience is an even more valuable trait then intelligence in investing. In investing risk and return are better measured in decades not years.

We have spent an enormous amount of time in 2016 doing extensive due diligence on every mutual fund, ETF (exchange-traded fund), or index that we recommend and I will say we’ve never been happier with the folks we have chosen to manage our investments. We expect better performing funds to have great years and bad years. Last year some of the funds we chose to invest in outperformed their market – and some underperformed. In some cases we purchased an ETF that seeks to mirror a particular stock market index as we believed this was a better strategy than purchasing mutual funds that are managed by a fund manager.

Our only requirement with ALL of our investments however, is we’re thinking in terms of decades, not years, and we will be patient when judging performance.

As you read LPL’s forecast for 2017, remember these are just guesses. No one KNOWS what will happen in 2017, all we can do is ensure we’re not taking on too much risk for your financial plan, and make sure we’ve selected appropriate folks in each category, and diligently select how much money will go into each asset class. From there we will be patient.

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 referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing in mutual funds and ETF's involves risk, including possible loss of principal. No strategy can ensure success or protect against loss.