A Review of my investment philosophy

January 16, 2019

First, it is always goal-focused and planning-driven, and distinctly different then the approach the financial press most often present – that is, market-focused and current-events-driven. Every successful investor I’ve ever known was acting continuously on a plan; failed investors, in my experience, get that way by reacting to current events in the economy and the markets.

I neither forecast the economy, nor attempt to time the markets, nor predict which market sectors will “outperform” which others over the next period of time. This is why I invest across market segments and geography. In a sentence that always bears repeating: I’m a planner rather than a prognosticator.

Once a client family and I have a plan in place—and have funded it with what have historically been the most appropriate types of investments—I do not change the portfolio allocation (mix of equities and bonds) due to market fears or fads – only when the goals change – such as planning for retirement income. As a general statement, I’ve found that the more often investors change their portfolios (in response to the market fears or fads of the moment), the worse their long-term results.

My essential principles of portfolio management are fourfold.

(1) The performance of a portfolio relative to a benchmark is largely irrelevant to long-term financial success.

(2) The only benchmark we should care about is the one that indicates whether you are on track to accomplish your financial goals.

(3) Risk should be measured as the probability that you won’t achieve your goals.

(4) Investing should have the exclusive objective of minimizing that risk.