The financial markets lost ground in Q3. Three of the five asset classes* we follow were lower in Q3; only commodities and Cash equivalents were up.  But, YTD Equities in the US (SP500) and  Internationally (MSCI World Index) were up double digits. We anticipate that well-diversified portfolios will likely be up for 2023, though of course nothing is certain.

In Q3, investors fretted about a “soft landing” v/s a “hard landing” for the economy and when the recession will happen.  Politics and the Government shut down are also headline topics. These are useful issues for the short-term oriented investor.  For us, however, the perennial pre-occupation is “what is a winning investment strategy for our clients over the next 10 or more years?”  We continue to believe that a well-diversified equity oriented portfolio is an effective all-weather strategy for investors who have long-term horizons and goals, like retirement.

Our approach, based on research is: invest in asset classes that have well established long-term results (like Equities).  Regularly monitor investments to make sure that they are delivering on their investment philosophies.  Cross-reference competing investments to ratify that our choices are compelling. And, we also keep abreast of investment strategies that may be good alternatives for portfolios. There are never guarantees to life, especially investment life, but we do believe our investment approach is a very defensible one for long horizon clients. Certainly, we are comfortable investing our money in this manner.

We respect investment risk by being vigilant as investors – vigilant about monitoring fundamentals and vigilant about monitoring risks but NOT reacting to each bit of new (especially sensationalist) news. And, we don’t chase fads and tend to make portfolio changes deliberately.

We believe that relying on time-tested principles is more important than trying to forecast the future, a futile endeavor in our opinion. To us it reinforces investment principles that have been profitable for us:  One, be evidence based investors i.e. dig deep into data to understand the sub-currents. Two, diversification is important for preserving portfolios.  Three, Volatility is not Risk so make friends with it.

Thus we plan to keep clients diversified across the 5 main asset classes, be prudent with any risks we take, and to remain cost-conscious. We think this remains a sound investment approach.

* Our Asset classes are: Cash, Fixed income, Equities, Real Estate and Commodities and we think these pretty much cover the investable investment universe.

16 Oct 2023