The Prevailing Investment Angst

“What should I do since the market is so high right now?” “It can’t continue to go up, it’s going down, right?” These questions represent the prevailing investment angst. This is where professional investment advice can be most valuable. We have to invest without knowing the answer to these questions. The short-term direction of the stock market cannot be predicted – this is true despite the constant barrage of predictions being made every day on the financial news.

The financial experts know a lot more about the markets and how the markets will perform in the future than the ordinary rest of us. Right? No!

As it turns out, the predictions made by financial experts are no better than those made by gypsies looking into crystal balls, soothsayers gazing at the entrails of a sacrificed animal or wizards with tall caps who gaze into space. In fact, the financial experts might even be LESS reliable than those other charlatans.

Somebody has been keeping a scorecard about these predictions, the prevailing truths espoused as a general consensus. Larry Swedroe, an economist and director of research for Buckingham Strategic Wealth, has kept records since 2010 and spent much of 2017 compiling predictions that were made with a great deal of certainty, and recently gave what might be called a “guru scorecard” of results. Here are six “sure things” that were predicted at the beginning of 2017 and how they actually turned out.

One popular prediction was that bond rates would rise dramatically in 2017, causing bond investors to book significant losses. Actual result: Bonds performed well in 2017, with long-term rates topping short-term rates even in the high credit quality portion of the market. This prediction is a fail.

The second consensus prediction was that inflation will rise significantly This prediction also didn’t happen in 2017. On Dec. 13, 2017, the BLS reported that the CPI for all Urban Consumers increased .4%, for all items rose 2.2%, and for all items less food and energy, was 1.7% – not significantly higher than last year.

The third prediction was a win: the growth rate of real GDP was predicted to improve from 1.6% in 2016 to 2.2% in 2017. The recent full-year forecast released Nov. 13, 2017 from the Federal Reserve Bank of Philadelphia is for real GDP growth of 2.2% in 2017.

Fourth, it was generally agreed that with the Fed tightening monetary policy and our economy improving faster than the economies of European and other developed nations and their central banks still pursuing the opposite easing monetary policies, that the dollar would strengthen. The dollar index (DXY) ended 2016 at 102.38 and ended 2017 at 92.3. Another prediction fail.

Fifth, with the political climate increasing concern over the potential for trade wars, it was generally espoused that investors should avoid emerging markets. Investors acting on these predictions would have lost out on significant returns. The Vanguard FTSE Emerging Markets ETF (VWO) returned 31.5% and Dimensional Fund Advisors Emerging Markets Core Fund (DFCEX) returned 36.55% in 2017. Fail.

The sixth prevailing consensus opinion was that, with the Shiller cyclically adjusted price-to-earnings (CAPD) ratio at 27.7 (66% above its long-term average), domestic stocks were overvalued. Compounding the issue with valuations, the reasoning goes, is that rising interest rates make bonds more competitive with stocks. Thus, it was predicted that U.S. stocks would be likely to have mediocre returns in 2017. A group of 15 Wall Street strategists called for the expected the S&P 500 to provide a total return of about 7%. The Vanguard 500 Index Fund, a proxy for the S&P 500, returned 21.67% in 2017. Prediction fail.

Seventh, was a prediction that, given their relative valuations, U.S. small-cap stocks would underperform large-cap stocks in 2017. Morningstar data showed that at the end of 2016, the prospective price-to-earnings (P/E) ratio of the Vanguard Small-Cap ETF (VB) stood at 21.4 while the P/E of the Vanguard S&P ETF (VOO) stood at 19.4. VOO returned 21.8% outperforming VB, which returned 16.3%. This prediction became true.

The last consensus prediction tracked by Swedrow was that, with non-US developed and emerging market economies generally growing at a slower pace than the US economy, with weak commodity prices, slower growth in China’s economy and the Fed tightening monetary policy and a rising dollar, that international developed market stocks would underperform U.S. stocks in 2017. This prediction did not bear out. The Vangueard FTSE Developed Markets ETF (VEA) returned 26.4%, outperforming VOO which we already noted returned 21.8%.

In all, the 2017 Scorecard resulted in only 2 out of 8 consensus predictions coming true. Imagine the disastrous investment program and individual would experience by taking action on all of these so-called “Expert Opinions.” Indeed, since 2010 when the Prediction Scorecard was started, the results have been consistently dismal. Of 62 significant predictions tracked over the past eight years, 43 turned out to be wrong.

All of this is worth remembering next time you hear a pundit or market guru make a confident prediction about what’s going to happen in the markets. Based on past history, you could have done better if you’d relied instead on a gypsy fortune teller.

The market is and will continue to be unpredictable. We have to live with this fact. And… we have to maintain an investment strategy designed to fulfill future goals. To counteract all of the misinformation and false predictions, maintaining a statistics-based, diversified investment strategy is the best defense.


From One Woman to Another: How to Handle that Financial Adviser Conversation

I’ve heard this story from so many women around the world. You go to the financial adviser meeting with your husband and he – the financial adviser – spends all his time talking with your husband and not you. You know that it’s important for you and your husband to make financial decisions together and you do. You are an integral part of these decisions, sometimes even taking responsibility for most of them. And yet you feel left out of this process.

How can you be more effective in meetings with the financial adviser?

How can you obtain the important information that you and your husband need to make better financial decisions for you as a couple and as a family?

The most often cited cause of conflict in marriages is money. You need to get this right.

I will help you get at the essential information that you need to manage your financial life effectively…and harmoniously.

These questions are organized into easy, hard and hard-ball. Even asking the easy ones gets you into the game as an active participant in the process. The harder questions are more confrontational, but essentially necessary if you are going to make sure your own financial needs are going to be met.

Some of these questions are geared towards interviewing a new adviser, however, they can certainly be asked when a relationship is already established. If you think the question may have been addressed, already,you can simply say ‘can you remind me again….” If you are looking to establish a relationship with an adviser you will want to interview several people to make sure they’re the right match for you and exhibit key traits of a good adviser.

You can also do some research on your own before the meeting. This will make you more aware of the people and the company you are dealing with and will make you more confident. Review the company’s website. Google the Partners’ names and find out as much as you can about them. Look at their profiles on LinkedIn. Jot down any questions that come up for you as you perform this review and add them to your list of questions for the next meeting.

Easy Questions

  1. What are your qualifications?
  2. Do you have many clients like me?
  3. How will you help me reach my financial goals?
  4. What happens to our relationship with the firm if something happens to you?
  5. What types of clients do you typically work with? Are we typical clients for you?
  6. Are you the only adviser that we will be working with?
  7. What services do you provide?
  8. How are you compensated?

Hard Questions

  1. Are you held to a fiduciary standard?
  2. Are you held to any specific Code of Ethics?
  3. Do you provide comprehensive financial planning or just investment management?
  4. What experience do you have? Tell me more about your professional background.
  5. What is your approach to financial planning?
  6. What is your approach to investment management?
  7. How much are we paying for your services?
  8. Can we have a copy of your Form ADV Part II?

Hard Ball Questions

  1. If you accept commissions, will you itemize the amount of compensation you earn from products that you recommend to us?
  2. Do you accept referral fees?
  3. Would you sign a fiduciary oath committing you to put our financial interests first?
  4. Have you ever been disciplined by the SEC or FINRA?
  5. What is your investment management track record?
  6. Is there anyone else who stands to gain from the advice that you are giving us?
  7. Have you ever been publicly disciplined for any unlawful or unethical actions in your career?

It is very important that you identify which services the financial adviser provides and think about what services you really need. If you need comprehensive financial planning and your financial adviser provides only investment advice, you may have uncovered a source of frustration. Use these questions to insinuate yourself into the conversation when you and your husband meet with your financial adviser. As you do, you will gain confidence and effectiveness as a financial decision-maker for yourself, your marriage and your family.

Ann Terranova Financial Advisor

The DJIA and The Economy by Ann Terranova, CFP®

People are surprised that the rising stock market of the past several years has not happened in lock step with economic recovery.

The DJIA, or any other stock market index, is NOT a good proxy for the economy and it never will be.  The article (link below) says that the ‘market has been disconnected from the broader economy ‘for a while now.’  The market is always disconnected from the broader economy.  The stock market is not correlated to the economy in the way people want it to be, or think it is, or think it should be, and it never will.

Unemployment is a lagging economic indicator which means that the unemployment statistics are generally the last item to improve in a recovery.  The stock market in general is a leading economic indicator.  The stock market will, in general, advance before an economic recovery manifests itself.  Yes, there is a ‘disconnect’ because it makes no sense that the stock market will be good while the economy is still bad, it just feels ‘wrong.’

But, let’s look back at the last five US recessions dating back to the early 1970s. Three of the five recessions saw the unemployment rate continue to rise even after the recession was officially over. This is why the unemployment number is often referred to as a lagging economic indicator.

Whether the rising stock market induces people (so-called average people) to go out and spend money thereby bolstering the economy misses an important point.  Higher stock prices add value to companies that can then use that added value to grow their businesses, expand and …..hire.

Read more about the DJIA and The Economy by following the link below:

To Take Control Of Your Personal Finances Requires Knowing Your Starting Point

Do I really need a Personal Balance Sheet? (Yes!!)

This is the first of a 3-part series about “Taking Control of Your Finances”.  The series will cover these interrelated topics: “Your Personal Balance Sheet”, “Your Cash Flow”, and “Managing Spending.” In this series of articles, I will describe how to gather and organize the building blocks of financial information that you will need to take control of your finances.  The first building block is your Personal Balance Sheet.  Creating a Personal Balance Sheet is a great way to start the drive toward your goals, stay on top of your finances, and successfully manage your money.
To Take Control Of Your Personal Finances Requires Knowing Your Starting Point

Taking control of your finances necessitates knowing your starting point by taking a snapshot of your financial status. That is what a Balance Sheet is – a snapshot in time of your financial status that lists of all of your assets (cash plus items you own) and liabilities (your debts, if any).  Knowing your financial starting point is essential to achieving your financial goals.  You need this information to gauge your success and then calculate the rate at which your wealth is growing over time. Think of this as getting directions to a destination … you must first know your starting point.

That is why you need a Personal Balance Sheet.

Businesses use financial statements to successfully manage their operations and to measure their growth.  The most basic and commonly used financial statements are a Balance Sheet and a Cash Flow Statement (also called a Profit/Loss Statement).  You, too, can apply these basic financial principles to successfully manage your personal finances thus treating your personal finances with professional sophistication and applied analytical methods.

Gathering the information to create your Balance Sheet can be accomplished with just a few clicks thanks to the availability of data aggregation software applications that access the information needed and present it in simple consolidated view.  You can quickly create a list of all of your financial accounts and their corresponding balances.  These balances will automatically be updated for you on an ongoing basis.  I highly recommend the use of an online application such as SaveUp ( to access and aggregate your financial data into such a list. There are other programs, online and offline too, such as Mint; however SaveUp is a great choice because it encourages you to save money, and rewards you for doing so.

SaveUp Accounts List (select to view larger image)You simply list your bank accounts, credit card accounts, investment accounts and retirement account (including your company 401k account) and SaveUp does the rest. Your SaveUp dashboard automatically fetches, updates, and shows you your balances. To complete your Personal Balance Sheet, you will want to add other significant personal assets such as the value of your home, automobiles, and anything else of significant value that cannot be retrieved by a data aggregation application. To do this, I recommend using a spreadsheet program such as Excel, Google Docs, etc. to create your Personal Balance Sheet.

To turn a bunch of numbers on a page into useful information, I recommend that you organize your assets and liabilities into three categories:  Personal Assets, Investment Accounts, and Cash Flow Accounts.  The way you manage money, invest, or make decisions, as you will see, is very different for each of these categories, so organizing your assets into these categories is essential.

Personal Assets are acquired for personal use and are distinct from investment assets that you acquire to meet some future financial need. That future financial need really is living expenses and the purchase of personal assets at some point in the future.  Your home, furniture, automobiles, collectibles and other assets have personal value that you can derive pleasure from.  However, you are unlikely to want to sell Personal Assets to meet your lifestyle needs in retirement.  As an example, you don’t expect to be in the position of having to sell your car to pay for food.  While your home certainly has investment characteristics, it is essentially the place you live.  You do not want to be forced to sell it for financial survival in the future.

Investment Assets are acquired specifically to meet your future financial needs. We do not derive any specific value or pleasure from these assets. We don’t eat them, live in them, drive them, etc. These investments are a means to an end. These assets are saved and invested to grow so that they can be used by you and your family to meet future personal and lifestyle needs and goals.  Investment assets include taxable investment accounts, stocks, bonds, mutual funds, exchange traded funds (ETF), cash savings, retirement accounts and rental real estate.

Cash Flow/Spending Accounts are the accounts you use to manage your daily, monthly and annual spending.  These accounts are generally held at a bank or credit union, but could include money market funds in a brokerage account.  These types of accounts provide ready access to your money through checks, debit/credit cards, online access, transfers, and automatic bill paying.   Credit cards, too, can also be a part of your of your cash flow system as many people like the miles or rewards points associated with them.

This general rule will make it easy to classify accounts:  If an account has money in it that you intend to use in the next year – classify it as a Cash Flow/Spending Account.  If the money is going to be used one or more years into the future, then classify it as an Investment Account.  If you are never going to sell it to buy groceries or pay for common living expenses, then classify it as a Personal Asset.

Your Personal Balance Sheet will be most useful if you further classify your Investment accounts in order of liquidity, or in other words the length of time before you expect to use the money accumulating in that account.    Think of liquidity as a way to begin matching each investment account with the time horizon that corresponds to the financial need or goal that account is intended to fulfill.  For example, you may have an investment account earmarked to fund a child’s college tuition.  The time horizon on that money could be 5 – 15 years depending on your child’s age when you initially establish the account. Your retirement accounts have a much longer time horizon (20 – 40 years).

Your Personal Assets are last because they are likely to be with you forever and be passed on to your heirs, so you should put them at the bottom of your Balance Sheet. Here is an example of what your Personal Balance Sheet might look like.

Mary and Tim’s Personal Balance Sheet as of October 2012 (starting point)

Assets Person Amount  Notes:
Checking Mary $1,500
Checking Tim $1,800
Checking Joint $3,200 Household spending acct.
Investment Account Tim $35,682 Adding $500/month (avg. annual 6%)
Job 401k Mary $58,336 Adding $500/month  (avg. annual 8%)
Job 401k Tim $28,452 Adding $600/mo (avg. annual 8%)
Home Joint $650,000
Total Assets $778,970
Student Loan Tim $38,452 6%, $456/mo.
Mortgage Joint $552,000 5% interest, $2,952/mo
Total Liabilities $590,452
Net Worth $188,518

Let’s now address what do you do with your Personal Balance Sheet. You can begin to track your progress building your net worth by comparing balance sheets over time. You can compare your current Balance Sheet with last year’s Balance Sheet and see your progress.

A fun and rewarding exercise to do is to prepare a future Personal Balance Sheet. Simply create a copy of your spreadsheet and plug in amounts that you want to achieve – your future goals. Don’t worry too much about the math being used to calculate the future value.  Just getting a sense of future balances will help you start the goal-setting process. Being able to visualize your goals in this way is a very motivating way to capture your starting point and begin moving towards your goals. Here is the same balance sheet 5 years into the future:

Mary and Tim’s Personal Balance Sheet as of October 2017 (5 years later)

Assets Person Amount  Notes:
Checking Mary $1,500
Checking Tim $1,800
Checking Joint $3,200 Household spending acct.
Investment Account Tim $83,015 Adding $500/month (avg. annual 6%)
Job 401k Mary $123,650 Adding $500/month  (avg. annual 8%)
Job 401k Tim $86,475 Adding $600/mo (avg. annual 8%)
Home Joint $650,000
Total Assets $949,640
Student Loan Tim $16,564 6%, $456/mo.
Mortgage Joint $481,152 5% interest, $2,952/mo
Total Liabilities $497,716
Net Worth $451,924

This 5-year growth example used reasonable assumptions to show what is potentially achievable.  It may seem astonishing that this example shows a net worth increase of $263,406 in five years!  How did such growth occur? It is easy to see by comparing the two Balance Sheets! Retirement of debt was $92,736 for 35% of the total increase. Savings deposits totaled $96,000 for 36% of the increase.  The remaining 29% growth in net worth of $74,670 came from the growth of the investments. Of course, there is no guarantee your investments will increase at the rates shown in this example, or at all in any given period of time.  Managing the uncertainty of investment returns is addressed on the Union Financial Partners website at links provided immediately below. A future blog and webinar series will be also be devoted exclusively to this topic.

Your Personal Balance Sheet is a great place to start to take control of your finances.  Applying this basic business principle to your personal financial management brings a level of care, sophistication, and objectivity to your own financial management process. Your Personal Balance Sheet is the foundation for you to build strategies to reach your goals effectively.  Your data is now organized into a structure that is conducive to personal financial analysis and decision-making.  Your Personal Balance Sheet puts you in the driver’s seat on your financial journey.

Next in this series I will give you an organizational structure to help you understand and manage your cash flow – money coming in and going out.  The final installment of this series will address managing spending that will include simple and easy organizational methods that you can use to make conscious choices about your spending – without keeping track of every penny – so that you can “spend with confidence.”


Learn more about Investment Management Strategies:

In any financial reporting there is a possibility of human or mechanical error.  Union Financial Partners, Ann Terranova, or any financial source cannot guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Union Financial Partners or Ann Terranova or any other employee of Union Financial Partners be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of this content.

© 2012 Union Financial Partners. All rights reserved.


Ann Terranova Financial Advisor

Investment Basics #3: Reduce or Eliminate Risks That Don’t Pay You a Premium

In the prior post, Investment Basics #2:  Risk and Return are Related, I explained how to ‘capture’ investment return by increasing certain risk factors in your portfolio.  This means increasing the proportion of ‘small’ and ‘value’ stocks in your portfolio to improve expected return.  This is one of the strategies utilized at Union Financial Partners to improve the risk/return profile of our clients’ portfolios.  Now I’m going to discuss some other techniques that we use to reduce risks that don’t pay off.  I suggest you use this article to inventory the risks in your investment program to see which risks can be reduced or eliminated.  If you are unsure how to do this, you may want to contact us to request a portfolio risk audit.  Portfolio design is an important part of the wealth management process.

Any portfolio risk that can be reduced or eliminated without giving up return should be reduced or eliminated.  Diversification is the process of blending dissimilar investments together to mitigate the market risks inherent in any one type of investment.  To have diversification, you combine investments that are significantly dissimilar.  Stocks and bonds are significantly dissimilar and are thus considered separate ‘asset classes.’ Stocks are equity; bonds are debt.  Stocks and bonds respond to different market and economic forces.  The two fulfill different functions in a portfolio:  bonds protect principal, while stocks protect purchasing power.

Stock asset classes are based on size (large cap is a separate asset class from midcap and smallcap) and value (value stocks are a separate asset class from growth stocks).  Value is defined as low book value to market value or “book to market.”  Value stocks are “cheap” and Growth stocks are “expensive” on a book to market basis.  These are the only features of stocks (called ‘factors’) that have been proven academically to be significant.  There is a heap of academic evidence to support the fact that smallcap stocks behave differently from large cap.  This academic foundation about asset classes is the basis of the widely-acknowledged ‘Morningstar Style Boxes’ which divide the stock universe into Large/Small, Value/Growth characteristics.  Blending stock asset classes together in a portfolio is another form of diversification used by professional investment advisors to improve the risk/return profile of a portfolio.  Diversification is an essential risk reduction technique practiced by virtually all professional portfolio managers.

There are investment risks that can be eliminated in the portfolio management process.  If a risk can be eliminated, why not do it?  Company specific risk – the risk that a particular company will suffer a setback – can be eliminated by expanding the number of stocks held in the portfolio.  Active management increases company-specific risk and has not been shown to increase return on a consistent basis.  Passive management and a wide breadth of holdings can effectively eliminate company-specific risk.  Timing risks can also be eliminated by refusing to engage in investment strategies that employ market timing.  The risks of market timing far outweigh any possible advantages and should be avoided.  A systematic deposit (accumulation) or withdrawal (decumulation) program will antidote the desire to time the market based on technical, economic or sensational current events.

The role of fixed income (bonds) in the portfolio is to reduce volatility risk and protect principle. Risk in bond investing is reduced by using high quality bonds, by shortening the duration of the bonds, and by holding large numbers of bonds.  Holding individual bonds gives the investor more control over the holdings and therefore more principal protection than a mutual fund.  The individual, unlike the bond mutual fund manager, will not be forced to sell the bond at a loss to meet the needs of other investors.

Active portfolio management introduces risks that are unnecessary and don’t have a history of paying a premium.  Active management, picking specific stocks to buy and anticipating that these companies will be ‘winners’ while avoiding stocks predicted to be ‘losers’ is an investment style that carries more risk than passive (broad investment holdings).  There is no academic basis that supports the theory that active management by mutual fund managers adds return to compensate investors for the added risk.  Active management is a risk that can be easily avoided by constructing a portfolio using passive mutual funds and ETF’s.

This overview of portfolio risks is intended to give you a guide to understanding the risks inherent in your portfolio and some basic techniques for mitigating or eliminating specific risks.  Diversification mitigates risk, while a disciplined, passive investment management program can virtually eliminate most, if not all, company-specific and market timing risks.  Reducing and eliminating risks is an important part of the portfolio management process.  If you want to take advantage of these techniques, Union Financial Partners can conduct a portfolio risk audit for you and can explain the strengths and/or weaknesses of your portfolio’s risk/return profile.

Chart of the Standard & Poor's 500 Index for the first quarter of 2012

S&P 500 Index Posts Best First-Quarter Gains in 14 Years

The first quarter of 2012 has just ended. You probably noticed gains in your equity based investments. You also probably noticed one of the many headlines trumpeting that the Standard & Poor’s 500 (S&P 500) Index for the now-concluded first quarter of 2012 had a 12.00% gain; the biggest first-quarter gain since 1998.

Chart of the Standard & Poor's 500 Index for the first quarter of 2012

Lets add some perspective to this very welcome and exciting development starting with a brief description and discussion about the S&P 500 Index – a weighted index of 500 large US corporation stocks. Indexes such as this are benchmarks for market performance, specifically they are an indicator of whether the market is rising or declining, and by how much. There are several major indexes that serve as bellweathers for US equities markets that include: the Dow Jones Industrial Average, the NASDAQ, the Wilshire 5000, and the Russell 2000. When you look at financial information in magazines, newspapers, financial papers, and on many web sites, you usually see some or all of these indexes quoted and charted. You will also see other sector-specific and glogal indexes intended to represent market activity. Generally speaking these indexes are averages of specific equities, so the law of averages applies. That is – if all or most major equity indexes have increased over a period then the sentiment of the stock market for that period is positive and, on average, equity values have increased. Specific equities including those within mutual funds and ETFs may not track market index movements, so it cannot be said that all investments increased in value. However what can be said is that investment portfolios that are properly balanced and include index-based instruments are likely to track the sentiment and gains represented by commonly used market indexes. Passive management of index-based funds generally keeps costs low, thereby amplifying growth by compounding. At Union Financial Partners we preach and practice creating diversified investment portfolios that include index-based passively managed funds.

When 2012 started could you have known that market returns for the first quarter would rise? Could you have known that the increase would be the best since 1998 (as measured by the S&P 500 Index)? Were you invested in the market to take advantage of these gains?

Our point in raising these questions is that you cannot know when the best day, week, quarter, or year will occur. If you were invested with a diversified investment portfolio throughout the entire quarter, then the value of your portfolio most likely rose. Capturing salient gains when they occur is critically important to the growth of an investment portfolio. This should not be misconstrued with jumping into the market after major gains occurred! Periods of substantial gains, often single days, occur very quickly and at random and cannot be predicted, which is why we stress disciplined investment management and remaining invested through market declines.

Several analyses reveal that missing “best days” in the market (days with the highest relative gains) has a very significant impact to the growth of a portfolio and a person’s wealth. The “Tips For Coping With Market Volatility” provided on our web site show that missing the best day of market gains resulted in ten percent (-10%) less realized returns over a 10-year investment period. This is worth repeating – if the best day was missed, then the portfolio’s growth is reduced in absolute dollar value by 10%. If the 5 best days were missed is even more significant; returns in that example were reduced by thirty five percent (-35%)! The 2012 Andex® Chart compiled and provided by Morningstar® includes a section on the “Cost of Market Timing” that reveals that missing the ten best days in the market between 1992 and 2011 reduced the annualized return rate of large-cap US stocks by almost half; from 7.8% to 4.1%. Even more striking is that the difference between the maximum returns and negative returns during that period are the 30 best days. Why would any of the best days be missed? The common reason is an investor becomes overly anxious and tries to minimize further perceived losses by selling their equities for cash and waiting for a better time to reinvest. In other words, the investor is attempting to “time the market”. Usually such an investor monitors the market and returns into the market after seeing a large increase, but of course this same investor misses and does not capitalize on that very important increase. In addition to missing large and salient increases, the transaction costs of jumping in and out of the market further depress the overall gains of a portfolio.

Against a backdrop of economic uncertainty, including the financial debt crisis in Greece, markets posted exceptional gains for the most recently ended calendar quarter. With or without the aid of a professional investment advisor, if you exercised discipline and were invested throughout the first quarter of 2012, and if an appropriate percentage of your holdings (the “growth component” of your portfolio) were diversified and included equities in US companies and/or mutual funds that track major US equity indexes, then you captured important gains that will positively impact the future growth of your investment portfolio and the growth of your wealth. As is stated in the Investment Management section of our web site: “Time in the market is critical to maximizing the growth of your wealth. Timing the market (or attempting to time the market) is more likely to restrict the growth of your wealth or result in actual losses”. We hope that the current bullish quarter helps you to appreciate and benefit from the wisdom of “time in the market”.