Why No One Is Entirely A Buy And Hold Investor
I got an email last week from a member of money for the rest of US plus. He has been listening to my show for over four years and loves it. You continue to like the way you explain financial strategies and how you occasionally cover the more personal aspects of life as well as investing. This gentleman retired three years ago when he turned fifty six, he has four million dollars in investable assets half, which is in cash and bonds. He follows one of the adaptive model portfolios on the website and converted over ten percent of his assets out of stocks in March based on the monthly investment conditions strategy report, we do on money for the rest of. US. Plus. He wrote to be honest decision I now heartily, regret. He could generate I really liked the sound logic. The analysis based approach you promote to help, decide how to dial up or down allocations to different asset classes in acknowledge your modifications have resulted in some investment success that said, I've typically been a classic buy and hold investor writing out the dips but this time in March I followed the logic to reduce the allocation stocks and wait for conditions to improve we all know how that turned down. How did it turn out? We have had the fastest bear market recovery ever in the US and around the world. His concern is that by the time investment conditions deteriorate or improve is already being reflected in market prices. Is there even a reason to make any adjustments to our asset mix? He I also know this was a very unusually fast drop and recovery. But as I plan to stick around as a plus member and take some level of guidance from the investment conditions, it seems like a fair question ask about what level back testing is available to see how this method works as an alternative to my old approach to just buy hold. I also recognize your approach covers asset classes, versus just stocks versus bonds and types of bonds such as real estate looks good or bad high yield looks good or bad etc.. Now, this monthly investment condition and strategy record has commentary and metrics to help individuals stick to the portfolio plan or perhaps to make adjustments as risk changed. Focuses on valuations, economic trends and investors sentiment. It relies on my over two decades of investment experience but also draws on data provided by institutional investment and Economic Research Services that we pay tens of thousand dollars per year to access. Now, I'm not trying to sell you on plus membership in this episode, but to be frank is email kind of bothered me a little bit not that he wrote it I think there's a absolutely fair questions and deserve a fair response. What bothered me was the challenges I've had in trying explain what portfolio management is. This member feels regret for a decision. He made one decision, but portfolio management involves many many decisions. I saw a tweet last week that also kind of bothered me not because there was anything wrong with the tweet, but it raises the question is better to trade buying individual stocks or to use options. Her view was better to use options because they're less expensive. That might be true. Again deciding to buy individual stocks with options that's just one decision. Wealth is not built preserved by buying individual options following the latest hot stock tip. Trading Foreign Exchange or following the guidance of Investment Newsletters that sometimes have doomsday scare tactics. My background is in institutional portfolio management. I worked with major universities like Texas, a, and m university. I was their investment advisor for thirteen years. They have over a billion dollars in assets. I've worked with other universities in private foundation. We often met with investment committees to tackle all the decisions involved a managing a portfolio the same decisions that individuals have to make in fact, individuals have to make even more decisions when it comes to managing an investment portfolio. What I have found is institutional investors and serious individual investors. They follow a disciplined portfolio approach. They focus on global multi asset class portfolios. They rely on reasonable expect to return and risk assumptions to make asset allocation decisions. Their focus is on a Chievo real net of inflation growth.