The tragedy in Japan is heartbreaking – we can’t imagine what the Japanese have gone through the past few weeks and will go through over the coming years. Our thoughts go out to the people of Japan as they deal with the aftermath of this tragic natural disaster. We expect the resilience that has guided Japan through numerous difficulties including the 1995 Kobe earthquake and the post WWII rebuild to once again lead them to recovery and prosperity.
My responsibility is to your investments and as is the case with all “events” such as this, there is no medium to long term impact on global markets which require any changes to portfolio’s. I am confident the investment managers of the funds we have chosen are doing what they have been paid to do – increase the value of your investments over time. The world has and will continually experience natural and man made disasters. Just in the past 10 years we have seen 9/11, invasion of Iraq, hurricane Katrina the US (and global!) Real Estate and mortgage financial crisis! Companies recover and continue to profit and build shareholder value.
Cycle of Emotions and investing
“Human nature being what it is, there is a natural cycle to our emotions about the markets. We tend to go from terror during a major decline to disbelief through much of the subsequent advance—and then to a sense of ‘I’ve missed it, and better get buying as the bull market continues. Again, this cycle of emotions is very human—but it’s a formula for very bad long-term investment outcomes.”
The weight of decades of historical evidence tells us good businesses increase shareholder value over time and their stock value appreciates. Yet the moving in and out of equity markets and the constant trading of stocks is pervasive – even among some investment managers. The average investor often feels they must react to falling markets by fleeing them and jump in and buy what’s hot when markets recover. This will hurt the investor in two ways – panicking out of markets and selling low and chasing the current performing investment and buying high.
After panicking out of the markets, chasing the current performing investment is the second way to ensure substandard returns. Warren Buffett famously said that the investor of today does not profit from yesterday’s growth, and performance-chasing is the most painful way of demonstrating that truth to yourself. You are almost always trying to buy a track record that someone else already got, and that turns out not to be duplicated.
The most reliable investment approach is to diversify across several equity sectors and styles—large company and small company, growth and value, domestic and international—in roughly equal amounts, and then rebalance your portfolio back to its original allocations once a year around the same time. This is the slow, steady and reliable approach to long-term equity investing. You will inevitably hear about a red-hot sector or investment taking off from time to time, but as you continue to invest regularly and rebalance annually you will exceed that “hot” investment over time.
Appropriate diversification with annual rebalancing remains the best equity strategy I know to pursue your long-term financial goals. I’d be to discuss this in more detail with you individually, if you feel that would be helpful
Warren Buffet on the economy, stocks, oil and gold – a must view~!
Buffet not worried about oil
Buffet prefers Stocks not Bonds
Japan’s radioactive fallout –
I found this article fascinating!
Have you read something like this before?
“Much of the American wealth is an illusion that is being secretly gnawed away and much of it will be wiped out in the near future…So what is the rest of your future? A grisly list of unpleasant events—exploding inflation, price controls, erosion of your savings (eventually to nothing), a collapse of private as well as government pension programs, and eventually an international monetary holocaust which will sweep all paper currencies down the drain and turn the world upside down.”
—Howard Ruff, author of such timeless classics as Famine and Survival in America, writing in 1979!
The Next Super cycle