2015 Client Letter: An Investment Approach Bordering on Sloth…

Dear Friends,

I had lunch with a client earlier this week.  In catching up, the King’s Dominion type roller coaster market we’ve witnessed lately was an appropriate discussion topic.  Before I could weigh in, they facetiously stated “I already know your answer:  Do Nothing!”  What can I say?  They took the words right out of my mouth.  We both laughed but I couldn’t help but acknowledge that this was an incredibly boring, even lackadaisical, approach to something very serious.  Do Nothing in a time of turmoil runs counter to the traditional decision making process we¹ve all shared for years.  Where to go to college?  Where to live?  Where to eat dinner?  Big decisions and small decisions typically follow a similar decision making process.  That is, we¹re rewarded for our due diligence and research.  We seem to be telling people the ordinary decision making rules we¹ve all followed for years don’t apply to investing.  How convenient for us!

It’s certainly not our intent to flood your inbox but I wanted to point out we’ve made lots of decisions together.  Each one based on your specific situation.  Doing nothing during times of turmoil is actually a decision we¹ve consciously made.  Research shows this approach will reward us over time.  Here are a few items I came across this week to help highlight this.

Carl Richards ­ You Are Not Crazy

This is a great 2:28 audio file.  Carl explains we’re not crazy for doing “nothing” and that we¹ve made lots of decisions leading up to this moment in time.

John Hancock ­ Dynamic Markets

John Hancock sent me some good information on the importance of staying invested throughout all market cycles.  I’d like to specifically point out the following Interactive Graphs:

  • The Trouble with Market Timing ­ Being out of the market and accidentally missing only a few of the biggest days from a return standpoint has a large impact over the long term
  • The Importance of Diversification ­ Picking winners and losers each year is challenging.  Proper diversification is critical.

Dimensional Funds ­ Can you predict a good time to buy and sell stocks?

This video is a bit technical but highlights the challenges of consistently predicting markets.

We hope you have a wonderful weekend and commend you on the resolve you’ve shown over the last few weeks.  I leave you with the following quote from a well respected investor.  I¹m not sure we¹re ready to adopt this as our company slogan, but we do find it amusing!

“Benign neglect, bordering on sloth, remains the hallmark of our investment process.”

-Warren Buffett

Thank You,

Jeffrey A. Hahn

Managing Director/CCO