Random thoughts...

A couple of Random thoughts for the week

• You may have heard the Wall Street addage before, “Sell in May and go away.” What does it mean? Well, if you look at seasonal investment performance, the summer time has historically been very dull, with flat to slightly negative runs in the equities markets. The addage hints that a trader should sell out of long positions and sit the summer on the sidelines. Should I follow this logic? I don’t think so. First, I think following seasonal patterns can be dangerous. I think looking at the current landscape and current market conditions is more relavent that worrying about how the markets performed during a couple of months each year in the past. Second, if you’r

e a trader, then you can follow trader logic. But if you are an investor, you should follow investor’s logic in buying quality investments, holding them for the long-term, and when appropriate, sell based on YOUR financial needs, based on fundamentals, based on long-term views. I don’t know what the next 3 or 4 months will bring, nor what the next 12 or 18 months will bring. But, if you’re a long-term investor, worrying about the statement value of your portfolio day-to-day is not in your best interest. So, stay on course with your plans.

• Looking at the markets year to date, the S&P 500 is up less than 2%. These returns are fragile. The entire year’s returns could be wiped out in a single day. The MSCI EAFE (international index) has had a pretty solid first half of the year, returning approximately 9.5% year to date. While this is not immune from being wiped out in a correction, it is much more likely to hold in day-to-day volatility. The US Aggregate Bond Index is up about 1% YTD. Returns in US investments have been quite modest year to date. Staying the course with a disciplined asset allocation approach would have helped investors see a little more punch in their portfolio thus far this year. As I stated in item 1, I don’t know what the second half of the year will bring, but I think maintaining a disciplined asset allocation strategy is the best solution for long-term investing and it’s stood the test of time.

I guess the common theme to this post is consistent with my overall investment philosophy…”Diversify, invest for the long-term, stay disciplined.” Also, whenever making investment and financial decisions, there is no one right answer. Do what works for you and what fits your best interest. There’s always a lot of noise out there you have to filter out. The noise will typically lead you in the wrong direction. For example, if you’d listened to the noise 6 months ago, you may have been inclined to abandon international investing, but international investments have significantly outperformed so far this year. Now if you hear the noise of today, you hear things like rate hikes, possible recession (strange that these two items are being talked about simultaneously), and deflation (in football and in the economy). Following the noise can be crippling. Stay Disciplined, Stay Diversified.