The Lesson of $1

Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, 2016. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Total returns in U.S. dollars. Past performance is no guarantee of future results.
 
U.S. Stock Market represented by the Fama/French Total US Market Index Portfolio, which is an an unmanaged index of stocks representing stocks of U.S. companies. U.S. Small Cap Stocks represented by the Fama/French US Small Cap Index, which is an unmanaged index of stocks of small U.S. companies. U.S. Value Stocks represented by Fama/French US Large Value Index (ex utilities), which is an unmanaged index of stocks of large U.S. companies with low relative price, excluding utilities companies. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar’s 2016 Stocks, Bonds, Bills, And Inflation Yearbook (2016). Indexes are unmanaged baskets of securities that investors cannot directly invest in. Index performance does not reflect the fees or expenses associated with the management of an actual portfolio.
The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. T Bills and government bonds are backed by the U. S. government and guaranteed as to the timely payment of principal and interest. T Bills and government bonds are subject to interest rate and inflation risk and their values will decline as interest rates rise. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, 2016. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Total returns in U.S. dollars. Past performance is no guarantee of future results.
 
U.S. Stock Market represented by the Fama/French Total US Market Index Portfolio, which is an an unmanaged index of stocks representing stocks of U.S. companies. U.S. Small Cap Stocks represented by the Fama/French US Small Cap Index, which is an unmanaged index of stocks of small U.S. companies. U.S. Value Stocks represented by Fama/French US Large Value Index (ex utilities), which is an unmanaged index of stocks of large U.S. companies with low relative price, excluding utilities companies. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar’s 2016 Stocks, Bonds, Bills, And Inflation Yearbook (2016). Indexes are unmanaged baskets of securities that investors cannot directly invest in. Index performance does not reflect the fees or expenses associated with the management of an actual portfolio.
 
The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. T Bills and government bonds are backed by the U. S. government and guaranteed as to the timely payment of principal and interest. T Bills and government bonds are subject to interest rate and inflation risk and their values will decline as interest rates rise. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

[/caption]One of the best opportunities to grow your money over the long term may come from making an investment in the stock market.
 
This chart illustrates the long-term growth of U.S. businesses over the past 90 years. If your grandparents had invested $1 in the U.S. Stock market, as measured by the Fama/French Total US Market Index, in 1927 and just left it alone, by the end of 2016 that $1 would have grown to $5,106. Invested in U.S. Small Cap Stocks, as measured by the Fama/French US Small Cap Index, that $1 would have grown to $24,586, and $8,050 if invested in U.S. Value Stocks, as measured by the Fama/French US Large Value Index. That same $1 invested in One-Month T-Bills would be worth $20 and if invested in Long- Term Government Bonds it would be worth $125.
 
Those who invested $1 back in 1927 would have had plenty of reasons to want to pull out of the market along the way — The Great Depression, World War II, Korea, Viet Nam, stagflation, the Great Recession — but by staying invested they could take advantage of every market recovery.
 
While we can never be certain about market direction in the short term, over the long-term we believe patient investors will be rewarded for staying invested.
 
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5 Reasons to Have an Investment Philosophy

5 Reasons to Have an Investment Philosophy

David Booth, co-founder and executive chairman of Dimensional Fund Advisors, has said, “The most important thing about an investment philosophy is that you have one.”
 
Do you have one? And if you do, does anyone else know about it? Is it on your website, in your marketing materials and part of your prospect/client conversations?
 
Here are five ways an investment philosophy can impact your practice:
 

  1. Efficiency
    Once you have a set of guiding principles that don’t change when the market changes, everything you do aligns with those principles. It may be easier to figure out what to spend time on — and what not to.
  2. Client Experience
    You can’t provide a good client experience to someone looking for something you don’t offer. Having an investment philosophy — and being up front about it — may help you find clients who are a good fit, and avoid those who aren’t. Better to find out at the beginning than spend time cultivating a relationship that won’t last long term. And having one clear investment philosophy may allow you to be more efficient in working with clients and helps you deliver a more consistent experience.
  3. Better chance of consistent investment results
    Changing investment philosophies every time the market changes is a bit like the driver who keeps changing lanes on a crowded highway. We’ve all done this before: The cars in the next lane keep passing you, so you change lanes…only to find that now the lane you were just in is moving and you’re stuck again. Choose a philosophy you can believe in, and stick with it.
  4. Differentiation
    Having a clear and public investment philosophy may help you stand out from advisors who do not. You may also attract centers of influence who can help you build your expert team.
  5. Client conversations
    Your investment philosophy provides a foundation for client meetings and conversations. Once your clients understand and believe in your philosophy, you can spend more time talking about their goals and how to reach them, and less time on what markets are doing.

“When you’re about to do something small, you need a reason. When you’re about to do something big, you need a plan. When you’re about to do something life-changing, you need a philosophy.”1
 
Taking the time to determine your investment philosophy forms the foundation for your practice, and makes it possible to do something potentially life-changing for your clients.
 


1“How to Formulate an Investment Philosophy,” Investopedia, Zina Kumok, June 17, 2016.
 
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Highlights from our National Education Conference

At Loring Ward’s recent National Education Conference in San Diego, more than 150 financial advisors gathered to learn new ideas from industry experts and from one another. Here is just a sample of what they heard:
 
“We are honored that you have decided to entrust so many of your clients’ savings to us…and the hopes and dreams these savings represent. Helping clients with the challenges and opportunities of aging and navigating retirement is becoming increasingly important. This is personal for all of us. We want to help you help your clients, but we all have parents and grandparents who need help and guidance throughout retirement.”
Alex Potts, President and CEO, Loring Ward
 
“If you specialize in retirement, does it say that on your website? Could I go on your website and get links to Medicare, AARP and other resources to help with retirement? If you are a retirement advisor, you should be the source of information — and not just financial information — for your clients.”
Barry LaValley, president, Retirement Lifestyle Center
 
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Reaching for New Heights at Loring Ward’s National Education Conference


 
More than 200 Advisors and Loring Ward employees gathered at the Broadmoor Hotel in Colorado Springs last week for our annual National Education Conference. It would be impossible to share all the inspiring/interesting/thoughtful insights participants shared and heard, but here are some highlights… Continue reading