Client Comfort
Most investors are their own worst enemy – we know that human beings make decisions based on emotions instead of reason. This has historically caused them to significantly underperform the stock market. While it is true that stocks have generated the best performance to investors over the truly long run, it is also true that there have been 20 year periods where, after inflation, investors in stocks made negative returns! And while our research supports our conclusion that the Margin of Safety Strategy is more robust, i.e. that there are fewer longer periods where returns are negative, this does not mean that even these strategies are not also volatile over shorter time horizons. We believe recognition of these facts help investors realize better returns. We use multiple tools to increase to our clients’ comfort level with investing, because none of our clients has Warren Buffet’s nerves.
The tools include:
- Discretionary Investment – investment strategy is decided collaboratively, but individual investments are not
- Retirement Income Account – Separating shorter-use assets from longer-use assets by separating income shortfall or “worry money” into 1-3 year bucket and 4-100 year bucket.
- Proactive Communication – through client workshops and proactive communications, we apprise our clients on the investment environment, what we are doing for them, and potential obstacles to be aware of
- Valuation-based Asset Allocation – portfolios are allocated according to overall market valuation as opposed to short term volatility concerns, in order to reduce the risk of permanent loss of capital and result in the best long-term returns
- Tough Love – When things look their worst is usually the best time to invest for long-term time horizon. We try every tool possible to make sure clients are invested according to their true time horizon and aren’t overly conservative.