As we
begin 2019 there are many questions about the future. The future of the equity
markets, the future of the political arena and many other questions. Questions
that cannot be answered with any degree of certainty.
You
will hear many ‘guesses’ and they are guesses. No matter what their credentials
are or what their track record. Any predictions are simple guesses.
I
have so far heard we will be a recession within, a year, the markets be choppy
for the entire year, the equity markets will soar with the S&P500 advancing
15% (Remember the 1990s when 15% would be scoffed at)
With
this wide array of predictions someone will be right. The problem is for the investor
there is no way of knowing who will be right.
As to
investors predictions are abundant but accountability is rare.
John
Bogle, inventor of the index fund and past chairman of Vanguard Investments was
speaking at an advisor conference. Now 80 years young, Mr. Bogle, shared the
best investing advice he ever got while a young man working as a runner for a
brokerage firm, a fellow runner, about the same age as Bogle is now told him
the secret ‘Nobody knows anything’.
During
his interview Mr. Bogle warned attendees that “we
give too much credence to past returns; past is not prologue,” saying instead
“it’s the source of the returns” that is more important. He then quoted Samuel
Taylor Coleridge that history is like “a lantern on the stern, which shines
only on the waves behind us.”
Discussing
investing opportunities, Bogle pooh-poohed private equity, saying that there
are “a lot of sellers, but not many buyers.” He still believes that
“performance chasing” is one of the most deadly of investing sins, that “I grow
more concerned about target-date funds every day,” is skeptical about 130/30
funds–“it’s not that easy”–and on exchange traded funds, “my skepticism is
increasing,” saying that his reading of the data shows that “ETF investors do
badly relative to mutual fund investors.” The problem is not the product but
the investor. They need a coach to guide them through the maze of financial
media and hype.
Basically
what Mr. Bogle is saying is that stock picking, market timing and performance
chasing do not work.
Developing
a customized portfolio, with regard to your comfortable risk level. Using a
scientific approach and remaining disciplined will maximize your opportunity
for a successful outcome. My clients understand this and will succeed in the
long run.
We
must remain diligent and stay focused. Own equities…… diversify…..rebalance.
