Embrace market pricing

The market is incredibly effective at taking the available information and building it into the prices of securities. For that reason, it is incredibly difficult to consistently outperform the market if you are relying on research to find the “winners” and “losers” at any given time.

Don’t try to outguess the market

While there are a very select few individuals who have made a career out of investing in specific securities - even Warren Buffett tells would be stock pickers that it’s unlikely they will consistently beat the market.

Avoid chasing past performance

Also known as “investing in the rear view mirror”. If a fund had good returns in the past, that should continue right? Past performance provides little insight into the future performance of a fund, and in fact only about 1 in 5 funds in the top quartile of 5 year performance remain in the top quartile for the following 5 years[1] .

Let the markets work for you

This can be tough in volatile markets, but over the long term investors that have avoided trying to time the market, or sell everything when the market is low, have outperformed those that try to work the market rather than the reverse.

Consider the drivers of returns

There is a ton of academic research into what factors drive returns. By utilizing this research, your portfolio can be set up in a way to succeed over the long term.

Practice smart diversification

You wouldn’t put all your wealth into one stock right? But why stop there - diversify into different industry segments and different global markets to gain exposure to the markets around the world.

Avoid market timing

By being in all segments of all markets, you don’t have to try to guess which area will outperform - you hold the entire market.

Manage your emotions

This is easier said than done - and usually where an advisor can have a conversation to determine if your changing risk tolerance is based on a change in circumstance or based on fear from current market conditions.

Look beyond the headlines

News source headlines aren’t concerned about your investment portfolio in the long term - they are concerned with grabbing readers attention right now. Remember the difference in time horizon and that you are looking out for the long term.

Focus on what you can control

This global pandemic has shown everyone that there is a lot we cannot control. Rather than lament what we can’t control, I want to focus on creating portfolios that reflect my clients needs, risk profile and tolerance, that is globally diversified and structured along the dimensions of expected return, while managing tax drag and fund expenses so we are confident enough to stay steady when the markets undergo turmoil.

[1] According to DFA Paper “The Fund Landscape 2024 USA/Canada” with data taken internally and from Morningstar.