I don’t know about you, but I always give myself until at least March to establish my resolutions for the year, and that deadline is fast approaching.
For 2017, my resolutions are all about increasing physical and financial well-being. Thus, I have one resolution for me and one for you. Let’s start with the physical side, which is the resolution for me.
When it comes to exercise, my wife is the tortoise and I am the hare. She wakes up every morning at the same time, has 1½ cups of coffee, and then exercises according to a well-defined weekly schedule. She exercises hard, but nothing too extreme, typically running or walking with friends. But it is extreme in its consistency. It’s like clockwork, and she enjoys wonderful health and fitness as a result.
I, on the other hand, make grand plans for extreme fitness between bouts of rediscovering the joys of slumber, sloth and brownies. 2016 was the year of strength training, the pursuit of big muscles and, as it turned out, even bigger copays to a very kind physical therapist. I purchased a series of exercise videos called P90X. Sore is far too mild a term to describe how every muscle in my body felt after these workouts. I kept telling myself: no pain, no gain, but after my back went out twice (once while hopping around like a jack rabbit crossed with a wildebeest and once doing a yoga pose that I have coined the Awkward & Unstable Midlife Warrior), I decided that I could no longer sustain the pace of copays I was making to the very kind physical therapist.
My resolution for 2017: exercise like my wife. I will strive for moderation, consistency and discipline in my exercise routine. The data says that regular exercise gives us more energy, allows us to sleep better, prevents disease of all kinds and improves our mood and our ability to deal with stress. These benefits trickle into other aspects of our lives and the benefits create more benefits.
While I wish all my clients health, wellness and exercise in all its forms in 2017, my resolution for all of you is related to your financial well-being. I want all of you to approach financial planning and investing the way my wife approaches exercise. I want all of you to be consistent and disciplined with your planning and investing. Just as there is strong data to support regular exercise, there is very strong data to support consistency and discipline in financial planning and investing. Those that pursue a path of consistency and discipline in their financial affairs will maximize the likelihood that they will enjoy the benefits of long-term financial fitness.
I want all of you to approach financial planning and investing the way my wife approaches exercise.
There are several key principles that disciplined investors follow and that we incorporate into our investment philosophy at Baker Boyer. First, it is important to choose a portfolio that fits your tolerance for risk. We help our clients with that decision, as many of you know. Second, it is important to diversify your assets. More specifically, it is important to own stocks and bonds that represent a broad range of geographies, industries and company sizes. Not putting all of your eggs in one basket will reduce the size of the ups and downs in portfolio value over time. That is a good thing because it will increase your ability to apply the last principle, which is the one I’m going to discuss in a little more depth. The final principle is that it is very important to stay invested.
I am focusing on the principle of staying invested because headline news continues to contribute to high levels of investor anxiety. I see it in questions from clients about the future of the EU post-Brexit, the rise of China and Russia and the potential for conflict. And of course the U.S. election and the direction of future policy on everything from trade to healthcare to education to defense. For investors, discipline in the years to come will be just as important as it has been in the past, which is to say: extremely important.
Just as it is tempting for me to sleep in as my wife finishes her
1½ cups of coffee and puts on her running shoes, it is tempting for all of us to want to sell stocks based on something we read on the internet or saw in a newspaper headline. But the data is clear: we need to maintain our discipline and avoid the temptation to make investment decisions based on headlines and emotions.
We need look no farther than the recent election for a lesson in the perils of market timing and the rewards to discipline. Conventional wisdom was that a Trump victory would be destabilizing to the economy and that markets would sell-off in response. We probably all know someone that prepared for the election by raising some cash. Those people, as of the writing of this article, are still waiting for the opportunity to buy back into the market, as post-election stock market returns have been very good.
So please join me in 2017 in responding to the ups and downs of the market with the confidence that comes from being a disciplined investor, one that has planned for the volatility.
If you are a D.S. Baker Advisors client, you have surrounded yourself with a team of experts that will help you to create and maintain a plan for financial success that is tailored to your goals and your journey through life. It includes an investment plan that is tailored to your ability and willingness to take market risk of all kinds. We can’t control the ups and downs of the market, but we can control how we respond. So please join me in 2017 in responding to the ups and downs of the market with the confidence that comes from being a disciplined investor, one that has planned for the volatility. If can I muster the same discipline in response to my alarm clock in the morning, 2017 is going to be a great year for all of us.
Vice President | Senior Portfolio Manager