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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Why Uncertainty Might Just Be an Investor’s Best Friend

This blog is from the March issue of Portfolio Perspectives.
 
With many stock market indices at all-time highs, Washington awash in political turmoil and unsettling news around the globe, many investors may be unsure what to do next.
 
And we believe that is a good thing.
 
Continue reading

Great “Client” Expectations

Guest author Michael Noland is a financial advisor and managing partner with Integrated Financial in Tulsa, Oklahoma.
 
One of the things I tell my clients is that if I’m doing my job as their advisor, they will be mad at me fairly often. This definitely gets their attention and then gives me an opportunity to have an important conversation about expectations.
 
To some extent, we probably all grapple with best practices for keeping clients happy as well as on track. Clients might call you about a hot stock tip their neighbor told them about, or they may feel strongly about being in a concentrated position but are lukewarm on the idea of a truly diversified portfolio. I like to tell my new clients, “If I told you I had a system that figured out how to time the market, you should run the other way immediately. (And I wouldn’t be working for a living if I actually could.)” Continue reading

Helping Your Clients Stay Calm Even When Markets Are Not

Since many of you may be getting questions about what the election results may mean for client portfolios, we have put together some resources to help educate clients and provide perspective.
 
The most important thing to keep in mind is that stocks have done well during the tenure of nearly every modern president, regardless of party affiliation. (See link below)
 
The results of the election, which caught most pollsters and pundits by surprise, are just one more in a long series of predictive failures this year, from the doom saying in January (“Sell everything”), to the failure of a peace referendum in Colombia, to Brexit.
 
Continue reading

What Happened Last Quarter… and Why Does it Matter?

Source: Chart sourced from How The Election Will Really Affect Your Investments, Money magazine, June 22, 2016. Returns from Morningstar Direct 2016 returns represent S&P 500 annual total return. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution.

Source: Chart sourced from How The Election Will Really Affect Your Investments, Money magazine, June 22, 2016. Returns from Morningstar Direct 2016 returns represent S&P 500 annual total return. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution.

Curious about what happened in the markets recently and how that may impact your long-term financial plan? Watch our three, short Making Sense of Markets videos to find out.
 

  1. Performance: Remember the Royal Bank of Scotland’s decree to “sell everything” earlier this year? Hopefully you didn’t pay attention to it, as gains continued in Q3; only U.S. REITs declined marginally in value. The big reversal was solid gains from Emerging Markets Value, International Small Cap and International Value, which all outpaced the S&P 500.
  2. Continue reading

Recommended Reading About the “Brainiacs” at Dimensional

screen-shot-2016-06-21-at-3-38-20-pmI enjoyed reading the recent article and Blog written by Jason Zweig of the Wall Street Journal pertaining to Dimensional Fund Advisors (DFA). As a fan of Jason’s and his message I am a bit biased; however, I felt he captured the ethos of DFA with the quote from Ken French, “We don’t try to do magic. We’re doing engineering.”
 
As a long-time personal client of DFA, and as a firm where nearly $13 Billion dollars of our clients’ long-term investments are managed by DFA, we feel fortunate to have such a thoughtful approach to asset class construction. I believe their no-apologies approach to asset class construction has allowed us to increase our chance of building better portfolios for long-term investors.
 
I’d encourage you to read the following articles (subscription is required):
 
Making Billions With One Belief: The Markets Can’t Be Beat
 
Straight Talk from the Brainiacs at DFA
 
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How to Lose Money

This blog is from the October issue of Portfolio Perspectives.
 
Loring Ward recently honored Dr. Harry Markowitz with our Heritage Award for his contributions to financial science that have impacted millions of investors as well as his many years of service on our Investment Committee. In recognition, we would like to share some insights from Dr. Markowitz adapted from his afterword to our book on wealth management: “The Wealth Solution.”

 
If you want to become an acknowledged Saint, it is best if you start by giving away all your money. If this prospect sounds too daunting, the following are four efficient suggestions for reducing your wealth. The first two may only lose most of it but the final two will make it all disappear. Continue reading