Lewis Wealth Management

Investment Management, Financial Planning, Consulting

Archive for January 2016

Here we go again . . .

leave a comment »

2016 is off to a rough start. Global markets were off sharply in the first two weeks of the year.

Investors are watching the contraction of the Chinese economy, low oil prices, and how higher interest rates in the US are causing distortions in the currency markets.

It’s tough to be an investor right now. Many do not feel they are making progress, even though they are.  Wages have been stagnant and investment returns have been low or non existent. But when you look at investment returns in the context of our low inflationary environment, you are likely making more progress than you think. Wage inflation is finally starting to pick up.

It’s a long-term game. There is a risk premium for investing in stocks, but it takes time to consistently collect it. Warren Buffett has said, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” Data shows this to be true. When you look at equity risk premiums over one, five, and ten year periods, you can see that if you are currently unhappy with your return on stocks (or any asset class for that matter), increase your holding period.

There are patterns in the market and investor behavior. When markets turn, some investors are fearful and cannot stay with a good investment strategy. They always underperform. Others are patient and disciplined. Their long-term performance is good.

Resist the urge to abandon your current portfolio (assuming you have a sound strategy) and chase returns elsewhere. There is no free lunch out there waiting for you. With record high prices, it’s not a good time to buy a rental home or fix and flip. Private investments, like hedge funds or your brother-in-law’s business, are risky, illiquid, and expensive. Gold, cash and CD’s are so-called “safe haven” assets and they may make you feel better initially, but they do not generate the long-term returns necessary to achieve your financial goals. Stock picking and market timing don’t work.

Take advantage of dips to rebalance your portfolio. While you wait for the market to turn, knock out your savings goals, reduce debt and streamline your spending. Grow your net worth over time.

Markets do recover.

Thank you,

Austin Lewis

For a full discussion, please see our current newsletter at www.LewisWM.com.

This is an educational post expressing opinions only. This post should not be relied upon until your individual situation is taken into consideration by an experienced advisor. This post is not designed or intended to give you individual investment, tax, or legal advice. We strongly recommend that you consult with your own financial/tax advisor and/or legal counsel for information and advice concerning your particular situation. Past performance does not indicate or guarantee future results. Investing involves risks, including loss of principal.

Written by Lewis Wealth Management

January 19, 2016 at 10:46 am

Posted in Uncategorized