As financial professionals, we know it's impossible to accurately and consistently time the short-term gyrations of the financial markets – we can't predict what they'll do tomorrow any more than we can predict what they'll do next year. But we also know, historically, that markets have moved higher over the long term, though not always in a straight line.
Consequently, although past performance is no guarantee of future results, we strongly believe that owning high-quality equity (stocks) and debt (fixed income) instruments often gives you the best chance of achieving the investment growth you need to outpace the effects of inflation and enjoy a comfortable lifestyle. We also believe that buying and holding these investments over time – in conjunction with actively monitoring their underlying fundamentals – is what drives investment success.
And because of these beliefs, we know that a key component in creating and maintaining an investment portfolio must be your comfort with risk.
Anyone can comfortably adjust to positive returns, but how you react to declining markets and portfolio losses is what’s most important.
If you can’t tolerate a 40%+ decline in the value of your investment portfolio, you shouldn’t be 100% invested in stocks. Conversely, if your portfolio is 50% stocks, you can’t expect average annual returns of 10%+ over the long-term. Risk and reward remain inexorably linked.
And it is that relationship – between risk and reward – that defines our overarching investment philosophy: First we must manage risk and only then seek returns.
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