The foundation of our investment style is rooted in the following beliefs:
HISTORY IS AN IMPORTANT TOOL.
We have to learn from the past and acknowledge that the current economic and investment environment has much in common with where we’ve already been. U.S. and world governments will use nearly identical fiscal and monetary policies to deal with changing conditions and the investing public reacts with greed and fear. Too often, investors don’t take sufficient time to appreciate economic and investment history, which in turn produces the same financial mistakes as the past. The phrase, “it’s different this time” regularly leads to ruin. We long ago decided to respect the past. Yes, there are differences, but there are many, many similarities.
PRICES GENERALLY MOVE IN LONG TRENDS, GUIDING US TOWARD WHAT WE CAN EXPECT FROM ECONOMIC AND FINANCIAL DATA.
Technical analysis should be a cornerstone of market and investment research. Although some investors may view charts as having little value, we believe quite the opposite: technical indicators can and should be used to identify the direction of current trends, as well as for potential changes in market conditions.
INVESTMENT RISK IS RELATIVE.
All people, regardless of age, education, background and personality, have different tolerance for financial risk. Not everyone is cut out to be an active investor and that’s perfectly acceptable. As long as an investment portfolio matches an investor’s temperament, long-term investment success can be achieved. There is no one best investment that will work for every investor. What’s important to understand from the beginning is that investments essentially fall into one of two categories — owning for long-term growth or loaning for investment income. Common stocks, REITS, bonds and preferred stocks all have strengths and weaknesses and we’ll help you understand how they may perform in various economic conditions.
AN INVESTMENT STRATEGY REQUIRES BOTH AN OFFENSIVE AND DEFENSIVE PLAN.
Investment success is much more than beating the market: it requires a disciplined strategy with a predetermined performance goal, a logical asset allocation, a proper investment-monitoring system and a policy for re-balancing one’s holdings. Similar to sporting events, victory comes from executing a solid strategy with a good offense and an effective defense — seldom only one or the other.
FADS COME AND GO. SOMETIMES, THE SAME ONES COME AGAIN. AND GO AGAIN.
Think back to what we said on the importance of remembering our history. On Wall Street, investment themes are constantly being re-packaged. During the 1920s, buying equities with high levels of margin debt was normal among everyday investors. In the bull market from 1982-2000, the notion of buying and holding stock mutual funds based on the efficient market hypothesis became a common strategy for many investors, big and small alike. Unfortunately, these strategies didn’t necessarily work well for those same investors during the ensuing bear markets. Common sense goes a long way in investing, while what’s popular in the press might not.