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Archive for June, 2012

15
Jun

Being patient is also financially beneficial!

Jeremy Grantham is the co-founder and Chief Investment Officer for Grantham Mayo Van Otterloo (GMO). He helps manage about $100 billion & he’s probably one of the great asset allocators in the game.  An article in the June 15th of The Wealth Advisor Weekender caught my eye. The discussion about Jeremy Grantham included the following quote:

“…The market can stay irrational longer than the client can stay patient.” Over the years, our estimate of “standard client patience time,” to coin a phrase, has been 3.0 years in normal conditions. Patience can be up to a year shorter than that in extreme cases …. “

I have previously commented on static.  That is the talking points, highlights in the media, etc. are used to increase readership and/or audiences.  Fear seems to be what they look for.  Increasingly the positives are short stories on the back pages, at the end of an article or not covered.

Have you noticed that amounts are often used when the percentage change is a small amount.  Many articles and stories will include amounts and percentages.  This can be a clue to an article that can be ignored.  When they use the number, it is often to exaggerate a change.  Some articles may use the word “most” (or a similar word) when reporting on surveys.  The most may be 38% when the other responses are 36% and 26%.  Other factors about surveys may not be given.  Even if they indicate the number of people surveyed they do not give how the  population surveyed was picked.  Did they pick rural or urban areas?  Did they pick larger cities or smaller towns.  If it was a national survey how did they determine how many people in each state would be picked?

As you read or listen to various sources, try to look beyond what is being said an identify what is not being said.  If it is an interview, determine if responses were complete  and candid response to what was being asked.

The above is important in trying to understand how what you read and hear impacts your investments.  Also try to see how often the market reacts the way you thought it would.  Other respective investment mangers take a long view.

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4
Jun

Investment approaches can be found in unexpected places

Chuck Jaffee’s June 3rd column in Market Watch from “The Avengers”, the latest superhero flick.  A summary ofis comments follows:

Like a superhero investors need to other understand their enemies.  Investors need to recognize what is scary.  It is important to stay with an investment philosophy and recognize “the bigger picture.”  A strategy can be fine-tuned rather than abandoned.

“As an investor, even if your core strategy is working, think about how to supplement and add to those basic tactics so that you have more weapons in times of danger and opportunity.”  Different changes maybe appropriate without abandoning e overall strategy.

“Most investors simply ignore what they don’t know or aren’t comfortable with. It’s why their portfolio has holes in it, or why their asset allocation is only in categories they are comfortable with. They invest in a way that says “If I don’t know the name of something, it can’t possibly be right for me.”

“Whether an investor needs to buy mutual funds or hire a financial adviser or simply do an evaluation that shows where their strategy has holes in it that need to be patched, it is important to find out where you are vulnerable before the market finds your weaknesses and turns them into personal traumas.”

Always “…expect the unexpected.”  ” An investor who builds an emergency plan — including savings to help tide over the rough patches — is anticipating both the dangers and the market cycles that lie ahead.”   
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