DIS and DAT - Fear? - January 2020

Our periodic communication that reminds you to ask, “Should I react to those headlines?”

“We simply attempt to be fearful when others are greedy, and greedy when others are fearful.”

Warren Buffett

General Markets Update

What would be our main observation of the current state of the market? The fear of missing out is high.  At times like this, it proves wise to avoid speculative behavior and invest more selectively.  Don’t think of investing from a price speculation standpoint. Questions such as, “If I buy at this stock price, can I sell it at a higher price to a greater fool tomorrow, next week, or next year?” Likewise, we also believe it prudent to avoid gambling with your investments. Instead, approach investments rationally by assessing and estimating future cash flows of the business in order to approximate value.

Creating an investment environment

Why do we need to be concerned about “an investment environment”?

When left to its own accord, the mind likes to “play tricks” on us.  One is to develop narrow framing over broad framing.  With a narrow outlook investors tend to overweight the importance of recent past price performance.  An investor is also narrow framing when they throw the baby out with the bath water by focusing on just the poor performing positions. We hope reading these next guidelines can help to place us all back to that broad view which seems to be so helpful in investing.

Guidelines for developing an investment mindset

Over the years, these factors to bear in mind have crucial in creating a positive investment environment. Essentially, it helps to be reminded of the philosophy as the management of the account takes place and market prices jump all around in dizzying fashion.

1. There is no guarantee on account performance.
2. Investment managers have discretion on investment decisions. 
3. We will not invest based on popularity but rather based on an analysis of the business and investment opportunity.
4. We have no skill in predicting market moves, economic cycles, nor political events, etc. Thankfully, we do not find that necessary to achieve decent investment returns.
5. We expect some investments will fail to achieve the desired result, thus the need for diversification and a broader view over multiple positions and time frames.
6. Investments performance should be judged on a time frame equivalent to a full market cycle.  That cycle is typically measured in years; five-year cycles are a general thought.
7. We are not seeking outperformance of all investments at all times.  If a popular momentum-driven pricing environment in any area of investments occurs, underperformance of that area is expected.

We hope this helps to make us all better investors!

Talk with you soon,

James

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Advisor.Investments [“AI]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from AI.  Please remember to contact AI, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  AI is neither a law Firm, nor a certified public accounting Firm, and no portion of the commentary content should be construed as legal or accounting advice.  A copy of the AI’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.