The financial markets continued to make strong gains in Q1 and the financial news remains upbeat most likely due to the continued strong performance.
The strong US equity returns were driven by the so-called “Magnificent 7”. But we also know that though these are great profit making businesses, they also represent only a handful out of the five hundred S&P500 companies. And, they are predominantly in one sector – technology. So we are also very aware that their dominance reduces broad market diversification.
The legendary investor, Warren Buffett gave the stock market a human avatar – “Mister Market”. Loosely paraphrasing him, he said that Mister Market was generally well behaved, but from time to time became excessively pessimistic and at other times excessively optimistic.
Drawing on his avatar, we think that most of the time Mister Market delivers reasonable returns to investors. But from time to time takes away the returns he gave to investors (Bear Markets) and at other times he is generous beyond reasonableness and gives investors more than they should expect (Bull markets). We believe that in Q1 of 2024 Mr. Market was in a most generous mood; a mood that will undoubtedly reverse and he will take away some of the gains he gave investors. But, experience shows that over time his well-behaved personality will exert itself. Hence, we ask our investors to take his erratic moods in stride by not reacting to them. In plain English: “Take the ups and downs of the market in your stride; over time you will be fairly rewarded as has happened in history”.
Our investment philosophy for high net worth investors with a long-term horizon remains steadfast: we are not seeing any new data or concepts to warrant changes. Our approach is: diversify portfolios over the main asset classes, keep a bias towards Equities, and keep a relentless focus on managing costs. We think this is a very feasible investment strategy to build assets and to ensure a comfortable retirement.